DENALI CAPITAL CLO VII, LTD. DENALI CAPITAL CLO VII (DELAWARE) LLC

Transcription

1 DENALI CAPITAL CLO VII, LTD. DENALI CAPITAL CLO VII (DELAWARE) LLC U.S.$150,000,000 Class A-1LR Variable Funding Notes Due January 2022 U.S.$482,000,000 Class A-1L Floating Rate Notes Due January 2022 U.S.$42,000,000 Class A-2L Floating Rate Notes Due January 2022 U.S.$41,000,000 Class A-3L Floating Rate Notes Due January 2022 U.S.$22,500,000 Class B-1L Floating Rate Notes Due January 2022 U.S.$18,000,000 Class B-2L Floating Rate Notes Due January 2022 U.S.$57,350,000 Income Notes Due January 2022 DC FUNDING PARTNERS LLC Collateral Manager The Notes, consisting of the Class A-1LR Variable Funding Notes Due January 2022 (the "Class A-1LR Notes") in the aggregate principal amount of U.S.$150,000,000, the Class A-1L Floating Rate Notes Due January 2022 (the "Class A-1L Notes" and, together with the Class A-1LR Notes, the "Class A-1 Notes") in the aggregate principal amount of U.S.$482,000,000, the Class A-2L Floating Rate Notes Due January 2022 (the "Class A-2L Notes" and, with the Class A-1LR Notes and the Class A-1L Notes, the "Senior Class A Notes") in the aggregate principal amount of U.S.$42,000,000, the Class A-3L Floating Rate Notes Due January 2022 (the "Class A-3L Notes" and, with the Senior Class A Notes, the "Class A Notes") in the aggregate principal amount of U.S.$41,000,000, the Class B-1L Floating Rate Notes Due January 2022 (the "Class B-1L Notes") in the aggregate principal amount of U.S.$22,500,000, the Class B-2L Floating Rate Notes Due January 2022 (the "Class B-2L Notes" and, with the Class B-1L Notes, the "Class B Notes" and, with the Class A Notes, the "Notes") in the aggregate principal amount of U.S.$18,000,000 and the Income Notes Due January 2022 (the "Income Notes" and, with the Notes, the "Securities") in the notional amount of U.S.$57,350,000 are being issued by Denali Capital CLO VII, Ltd. (the "Issuer"), a recently formed limited liability company incorporated under the laws of the (continued on third page) It is a condition of issuance that each of the Class A-1LR Notes and the Class A-1L Notes be rated "AAA" by Standard & Poor s Ratings Services ("S&P") and "Aaa" by Moody s Investors Service, Inc. ("Moody s"), the Class A-2L Notes be rated at least "AA" by S&P and at least "Aa2" by Moody s, the Class A- 3L Notes be rated at least "A" by S&P and at least "A2" by Moody s, the Class B-1L Notes be rated at least "BBB" by S&P and at least "Baa2" by Moody s and the Class B-2L Notes be rated at least "BB" by S&P and at least "Ba2" by Moody s. See "Ratings". The Income Notes will not be rated. Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for this Offering Circular to be approved. Application has been made to the Irish Stock Exchange ("ISE") for the Notes (other than the Class A-1LR Notes) (such Notes, the "Offered Notes") to be admitted to the Official List and trading on its regulated market. Such approval relates only to Notes which are to be admitted to trading on the regulated market of the ISE or other regulated markets for the purposes of Directive 93/22/EEC or which are to be offered to the public in any Member State of the European Economic Area. Application has been made to the ISE for the listing particulars to be approved. Application has been made to the ISE for the Income Notes (together with the Offered Notes, the "Offered Securities") to be admitted to listing and trading on its Alternative Securities Market, which is not a regulated market (as defined by Article 1(13) of Directive 93/22/EEC). For certain factors to be considered in connection with an investment in the Notes, see "Risk Factors" and "Notices to Purchasers." THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER RELEVANT JURISDICTION, AND NEITHER THE ISSUER NOR THE CO-ISSUER WILL BE REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). THE SECURITIES WILL BE OFFERED AND SOLD IN THE UNITED STATES TO PERSONS THAT ARE BOTH "QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) AND "QUALIFIED PURCHASERS" (AS DEFINED HEREIN). THE INCOME NOTES WILL BE OFFERED AND SOLD IN THE UNITED STATES TO PERSONS THAT ARE (A) "QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT) AND (B) "QUALIFIED PURCHASERS" FOR PURPOSES OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT OR "KNOWLEDGEABLE EMPLOYEES" WITHIN THE MEANING OF RULE 3c-5 OF THE INVESTMENT COMPANY ACT. THE SECURITIES WILL BE OFFERED AND SOLD OUTSIDE THE UNITED STATES TO PERSONS THAT ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S. IN MAKING ITS PURCHASE, EACH PURCHASER OF SECURITIES WILL BE REQUIRED TO MAKE OR DEEMED TO HAVE MADE CERTAIN ACKNOWLEDGMENTS, REPRESENTATIONS, AND AGREEMENTS DESCRIBED UNDER "TRANSFER RESTRICTIONS." The Notes (other than the Class B-2L Notes) are offered by the Co-Issuers and the Class B-2L Notes and the Income Notes are offered by the Issuer. The Securities will be offered through Bear, Stearns & Co. Inc. ("Bear Stearns") as initial purchaser (in such capacity, the "Initial Purchaser") to prospective purchasers from time to time in negotiated transactions at varying prices to be determined in each case at the time of sale. The Securities are offered when, as and if issued by the Co-Issuers (or, in the case of the Class B-2L Notes or the Income Notes, the Issuer), subject to prior sale or withdrawal, cancellation or modification of the offer without notice and subject to approval of certain legal matters by counsel and certain other conditions. It is expected that delivery of the Securities will be made on or about May 22, 2007 (the "Closing Date"), against payment in immediately available funds. See "Plan of Distribution." It is expected that the Notes (other than the Class A-1LR Notes and the Class B-2L Notes) offered and sold in the United States will be delivered in book-entry form only through the facilities of The Depository Trust Company ("DTC" or the "Depository"). The Notes (other than the Class A-1LR Notes) offered and sold outside the United States will be represented by temporary global notes which will be deposited with (in the case of the Class A-1L Notes, the Class A-2L Notes, the Class A-3L Notes and the Class B-1L Notes) a custodian for and registered in the name of a nominee of DTC for the accounts of, and in the case of the Class B-2L Notes, with a common or specialized depository on behalf of, Euroclear Bank S.A./N.V., as operator of The Euroclear System ("Euroclear") or Clearstream Banking, société anonyme ("Clearstream"). The Class B-2L Notes offered and sold in the United States and the Class A-1LR Notes will be delivered only in definitive, fully registered, certificated form. The Income Notes offered and sold in the United States will be delivered only in definitive, fully registered, certificated form. The Income Notes offered and sold outside the United States will be represented by one or more permanent global certificates in fully registered definitive form, which will be deposited with a common depository on behalf of Euroclear or Clearstream and registered in the name of a nominee of such depository. Bear, Stearns & Co. Inc. This Offering Circular is dated October 10, 2007

2 THIS OFFERING CIRCULAR CONSTITUTES A PROSPECTUS FOR THE PURPOSES OF THE PROSPECTUS DIRECTIVE AND THE LISTING OF THE OFFERED NOTES ON THE IRISH STOCK EXCHANGE. REFERENCE THROUGHOUT THE DOCUMENT TO THE "OFFERING CIRCULAR" SHALL BE TAKEN TO READ "PROSPECTUS" FOR THE PURPOSE OF LISTING THE NOTES ON THE REGULATED MARKET OF THE IRISH STOCK EXCHANGE. THIS OFFERING CIRCULAR CONSTITUTES A LISTING PARTICULARS FOR THE PURPOSES OF LISTING THE INCOME NOTES ON THE ALTERNATIVE SECURITIES MARKET OF THE IRISH STOCK EXCHANGE. REFERENCE THROUGHOUT THE DOCUMENT TO THE OFFERING CIRCULAR SHALL BE TAKEN TO READ LISTING PARTICULARS FOR THE PURPOSE OF LISTING THE INCOME NOTES ON THE ALTERNATIVE SECURITIES MARKET OF THE IRISH STOCK EXCHANGE. ii

3 (Continued from first page) Cayman Islands,and, with the exception of the Class B-2L Notes and the Income Notes, will be co-issued by Denali Capital CLO VII (Delaware) LLC, a recently formed Delaware corporation (the "Co-Issuer" and, together with the Issuer, the "Co-Issuers"), on a non-recourse basis as described herein. The Class B-2L Notes are being issued by the Issuer on a non-recourse basis as described herein. The Income Notes have the rights ascribed thereto in the Income Note Documents, as described herein. The Issuer will receive all of the net proceeds of the offering of the Securities, which will be used by the Issuer to purchase, or commit to purchase, on and after the Closing Date (defined below) and before the Effective Date (defined below) a portfolio of commercial loans (the "Portfolio Loans") and corporate or other debt obligations pledged to secure the Notes (together with the additional commercial loans and corporate or other debt obligations, including synthetic securities, that will be purchased by the Issuer from time to time and pledged to secure the Notes and certain other obligations as described herein, the "Collateral"). As described herein, the Collateral will consist primarily of commercial loans and, to a limited extent, high yield corporate or other debt obligations, that are rated below investment grade issued by U.S. and certain non-u.s. issuers and that satisfy the criteria described herein. The Class A-1LR Notes, the Class A-1L Notes, the Class A-2L Notes, the Class A-3L Notes, the Class B-1L Notes and the Class B-2L Notes will provide for the payment of Periodic Interest (as defined herein) (to the extent of funds available therefore as described herein) for each Periodic Interest Accrual Period (as defined herein) at the rate of 0.26%, 0.23%, 0.43%, 0.75%, 1.75% and 4.25% per annum, respectively, above the London interbank offered rate for three-month U.S. dollar deposits (or, for the period from the Closing Date to the first Payment Date, five-month U.S. dollar deposits) ("LIBOR") (determined as described herein); provided that Periodic Interest on the Class A-3L Notes, the Class B-1L Notes and the Class B-2L Notes will not be payable until the January 2008 Payment Date and will be calculated for the period from the Closing Date to such Payment Date based on LIBOR for eight-month U.S. dollar deposits; provided further that, solely to the extent funds are available for the payment in full of such amounts in accordance with the priority of payments described herein, the Class A-3L Notes, the Class B-1L Notes and the Class B-2L Notes will be entitled to receive, on the October 2007 Payment Date, Periodic Interest accrued with respect to the related Periodic Interest Accrual Period, and such Periodic Interest will be calculated for the period from the Closing Date to such Payment Date based on LIBOR for five-month U.S. dollar deposits. Payments on the Income Notes will not be payable at a stated rate but instead as described under "Application of Funds." Any such payments are in each case at the times and subject to the priority of payments described herein. The principal amount of the Notes will be payable at Stated Maturity in January 2022, to the extent not redeemed or paid in full before then. The Income Notes will receive certain amounts available for distribution to the Holders of the Income Notes in accordance with the Application of Funds. See "Application of Funds." Each Security will be subject to earlier repayment or redemption. The Notes, with the exception of the Class B-2L Notes, are non-recourse obligations of the Co-Issuers, and the Class B-2L Notes are non-recourse obligations of the Issuer, payable solely from the Trust Estate described herein. The Class B-2L Notes are subordinated to the Class A Notes and the Class B-1L Notes, the Class B-1L Notes are subordinated to the Class A Notes, the Class A-3L Notes are subordinated to the Senior Class A Notes and the Class A-2L Notes are subordinated to the Class A-1L Notes and the Class A-1LR Notes, in each case to the extent described herein. To the extent the assets of the Trust Estate are insufficient to pay in full all amounts due on the Notes, the Co-Issuers shall have no further obligations in respect of the Notes and any sums outstanding and unpaid shall be extinguished. The Income Notes will not be secured obligations of the Issuer. Distributions on the Income Notes will be paid solely from and to the extent of the available proceeds from the distributions on the Collateral which is the only source of such distributions in respect of the Income Notes. To the extent the Collateral is insufficient to pay distributions on or to redeem the Income Notes, the Issuer will have no obligation to pay any further amounts in respect of the Income Notes and any sums outstanding and unpaid shall be extinguished. iii

4 NOTICES TO PURCHASERS THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES, OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, UNLESS A REGISTRATION STATEMENT WITH RESPECT THERETO IS THEN EFFECTIVE UNDER THE SECURITIES ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. THE CO-ISSUERS HAVE NO OBLIGATION OR CURRENT INTENTION TO EFFECT SUCH REGISTRATION. THE CO-ISSUERS ARE RELYING ON AN EXCLUSION FROM REGISTRATION UNDER THE INVESTMENT COMPANY ACT, AND NO TRANSFER OF A SECURITY MAY BE MADE WHICH WOULD CAUSE THE CO-ISSUERS TO BECOME SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE INVESTMENT COMPANY ACT. THE SECURITIES ARE ALSO SUBJECT TO CERTAIN OTHER RESTRICTIONS ON TRANSFER DESCRIBED HEREIN. PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD PROCEED ON THE ASSUMPTION THAT THEY MUST HOLD THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE PURCHASER OF A SECURITY, BY ITS ACCEPTANCE THEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL NOT RESELL, PLEDGE OR OTHERWISE TRANSFER SUCH SECURITY EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND EXCEPT (A) (1) IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, WHOM THE SELLER HAS INFORMED, IN EACH CASE, THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND WHO IS A QUALIFIED PURCHASER FOR PURPOSES OF SECTION 3(c)(7) UNDER THE INVESTMENT COMPANY ACT, PROVIDED THAT SUCH PURCHASER DELIVERS ALL DOCUMENTS AND CERTIFICATIONS AS THE CO-ISSUERS OR THE TRUSTEE MAY REASONABLY REQUEST OR (2) SOLELY IN THE CASE OF THE INCOME NOTES, TO A PERSON WHO IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a) OF THE SECURITIES ACT) WHO IS A QUALIFIED PURCHASER FOR PURPOSES OF SECTION 3(c)(7) UNDER THE INVESTMENT COMPANY ACT OR A KNOWLEDGEABLE EMPLOYEE WITH RESPECT TO THE ISSUER WITHIN THE MEANING OF RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT; (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, PROVIDED THAT SUCH PURCHASER DELIVERS ALL DOCUMENTS AND CERTIFICATIONS AS THE CO-ISSUERS OR THE TRUSTEE MAY REASONABLY REQUEST; OR (C) TO THE CO-ISSUERS OR THEIR AFFILIATES, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES AND ANY OTHER JURISDICTION. IN ADDITION, THE PURCHASER OF A SECURITY, BY ITS ACCEPTANCE THEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL NOT RESELL, PLEDGE OR OTHERWISE TRANSFER SUCH SECURITY OTHER THAN TO A NON-U.S. PERSON IN AN "OFFSHORE TRANSACTION" IN COMPLIANCE WITH REGULATION S EXCEPT TO (A) A "QUALIFIED PURCHASER" WITHIN THE MEANING OF SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT OR (B) SOLELY IN THE CASE OF THE INCOME NOTES, TO A KNOWLEDGEABLE EMPLOYEE WITH RESPECT TO THE ISSUER WITHIN THE MEANING OF RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT, IN A TRANSACTION THAT DOES NOT CAUSE THE CO-ISSUERS TO BE REQUIRED TO REGISTER UNDER THE INVESTMENT COMPANY ACT AND WILL ALSO BE DEEMED TO HAVE MADE THE REPRESENTATIONS SET FORTH UNDER "TRANSFER RESTRICTIONS." FURTHER, THE CLASS A NOTES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). THE CLASS B-1L NOTES MAY NOT BE SOLD OR TRANSFERRED TO ANY PLAN SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE, OR TO ANY PERSON ACTING ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY SUCH PLAN, INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT, UNLESS THE PURCHASER OR TRANSFEREE IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER ANY OF SECTION 408(b)(17) OF ERISA OR PTCE 96-23, 95-60, 91-38, 90-1 OR THE CLASS B-2L NOTES AND THE INCOME NOTES MAY NOT BE SOLD OR TRANSFERRED TO ANY PLAN iv

5 SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE, TO ANY PERSON ACTING ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY SUCH PLAN, OR TO ANY OTHER "BENEFIT PLAN INVESTOR" (AS DEFINED IN SECTION 3(42) OF ERISA) (A "BENEFIT PLAN INVESTOR"), INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH HEREIN UNDER "CERTAIN ERISA CONSIDERATIONS." THE NOTES, WITH THE EXCEPTION OF THE CLASS B-2L NOTES, ARE NON-RECOURSE OBLIGATIONS OF THE CO-ISSUERS AND THE CLASS B-2L NOTES ARE NON-RECOURSE OBLIGATIONS OF THE ISSUER. PRINCIPAL OF AND INTEREST ON THE NOTES WILL BE PAID SOLELY FROM AND TO THE EXTENT OF THE AVAILABLE PROCEEDS FROM THE DISTRIBUTIONS ON THE COLLATERAL, WHICH ARE THE ONLY SOURCE OF PAYMENT OF PRINCIPAL OF, INTEREST ON AND OTHER AMOUNTS PAYABLE IN RESPECT OF THE NOTES. TO THE EXTENT SUCH SOURCES OF PAYMENT ARE INSUFFICIENT TO PAY IN FULL ALL AMOUNTS DUE ON THE NOTES, THE CO- ISSUERS SHALL HAVE NO FURTHER OBLIGATIONS IN RESPECT OF THE NOTES AND ANY SUMS OUTSTANDING AND UNPAID SHALL BE EXTINGUISHED. THE INCOME NOTES ENTITLEMENT IS LIMITED TO THE PROCEEDS OF THE COLLATERAL TO THE EXTENT AVAILABLE IN ACCORDANCE WITH THE APPLICATION OF FUNDS AFTER PAYMENT OF ALL AMOUNTS PAYABLE ON EACH CLASS OF NOTES AND CERTAIN OTHER AMOUNTS IN ACCORDANCE WITH THE APPLICATION OF FUNDS. ACCORDINGLY, TO THE EXTENT THE COLLATERAL IS INSUFFICIENT TO PAY ALL AMOUNTS DUE TO THE INCOME NOTES OR REDEEM THE INCOME NOTES, THE ISSUER WILL HAVE NO OBLIGATION TO PAY ANY FURTHER AMOUNTS IN RESPECT OF THE INCOME NOTES AND ANY SUMS OUTSTANDING AND UNPAID SHALL BE EXTINGUISHED. FOR THESE REASONS, AMONG OTHERS, AN INVESTMENT IN THE SECURITIES IS NOT SUITABLE FOR ALL INVESTORS AND IS APPROPRIATE ONLY FOR AN INVESTOR CAPABLE OF (A) ANALYZING AND ASSESSING THE RISKS ASSOCIATED WITH DEFAULTS, LOSSES AND RECOVERIES ON, REINVESTMENT OF PROCEEDS OF AND OTHER CHARACTERISTICS OF, LOANS AND DEBT SECURITIES SUCH AS THE COLLATERAL, AND (B) BEARING SUCH RISKS AND FINANCIAL CONSEQUENCES THEREOF AS THEY RELATE TO AN INVESTMENT IN THE SECURITIES. EACH PURCHASER OF A SECURITY BY ITS ACCEPTANCE THEREOF ACKNOWLEDGES THAT IT IS USING ITS INDEPENDENT JUDGMENT IN ASSESSING THE OPPORTUNITIES AND RISKS PRESENTED BY THE SECURITIES FOR ITS INVESTMENT PORTFOLIO AND IN DETERMINING WHETHER THE ACQUISITION IS SUITABLE AND COMPLIES WITH SUCH PURCHASER S INVESTMENT OBJECTIVES AND POLICIES. EXCEPT AS SET FORTH IN THIS OFFERING CIRCULAR, NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING CIRCULAR AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION NOR TO ANY PERSON WHO HAS NOT RECEIVED A COPY OF EACH CURRENT AMENDMENT OR SUPPLEMENT HERETO, IF ANY. THIS OFFERING CIRCULAR IS FURNISHED SOLELY FOR THE PURPOSE OF EVALUATING THE INVESTMENT OFFERED HEREBY. THE INFORMATION CONTAINED HEREIN MAY NOT BE REPRODUCED OR USED IN WHOLE OR IN PART FOR ANY OTHER PURPOSE. NOTWITHSTANDING ANY OTHER EXPRESS OR IMPLIED AGREEMENT TO THE CONTRARY, THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER, THE INITIAL PURCHASER, THE TRUSTEE, THE COLLATERAL ADMINISTRATOR AND EACH RECIPIENT HEREOF AGREE THAT EACH OF THEM AND EACH OF THEIR EMPLOYEES, REPRESENTATIVES, AND OTHER AGENTS MAY DISCLOSE, IMMEDIATELY UPON COMMENCEMENT OF DISCUSSIONS, TO ANY AND ALL PERSONS, v

6 WITHOUT LIMITATION OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO ANY OF THEM RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE, EXCEPT WHERE CONFIDENTIALITY IS REASONABLY NECESSARY TO COMPLY WITH UNITED STATES FEDERAL OR STATE SECURITIES LAWS. THE SECURITIES ARE BEING OFFERED ONLY TO A LIMITED NUMBER OF INVESTORS (ALL OF WHICH ARE REQUIRED TO BE QUALIFIED INSTITUTIONAL BUYERS OR, SOLELY IN THE CASE OF THE INCOME NOTES, ACCREDITED INVESTORS, OR INVESTORS WHO ARE OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR RULE 904 OF REGULATION S OF THE SECURITIES ACT) THAT ARE WILLING AND ABLE TO CONDUCT AN INDEPENDENT INVESTIGATION OF THE CHARACTERISTICS OF THE SECURITIES AND RISKS OF OWNERSHIP OF THE SECURITIES. IT IS EXPECTED THAT PROSPECTIVE INVESTORS INTERESTED IN PARTICIPATING IN THIS OFFERING WILL CONDUCT AN INDEPENDENT INVESTIGATION OF THE RISKS POSED BY AN INVESTMENT IN THE SECURITIES. OFFICERS AND OTHER REPRESENTATIVES OF THE CO-ISSUERS AND THE INITIAL PURCHASER WILL BE AVAILABLE TO ANSWER QUESTIONS CONCERNING THE CO-ISSUERS, THE SECURITIES AND THE COLLATERAL AND WILL, UPON REQUEST, MAKE AVAILABLE SUCH OTHER INFORMATION AS INVESTORS MAY REASONABLY REQUEST. THIS OFFERING CIRCULAR IS NOT INTENDED TO FURNISH LEGAL, REGULATORY, TAX, ACCOUNTING, INVESTMENT OR OTHER ADVICE TO ANY PROSPECTIVE PURCHASER OF THE SECURITIES. THIS OFFERING CIRCULAR SHOULD BE REVIEWED BY EACH PROSPECTIVE PURCHASER AND ITS LEGAL, REGULATORY, TAX, ACCOUNTING, INVESTMENT AND OTHER ADVISORS. INVESTORS WHOSE INVESTMENT AUTHORITY IS SUBJECT TO LEGAL RESTRICTIONS SHOULD CONSULT THEIR OWN LEGAL ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT THE SECURITIES CONSTITUTE LEGAL INVESTMENTS FOR THEM. NO INVITATION MAY BE MADE TO THE PUBLIC IN THE CAYMAN ISLANDS TO SUBSCRIBE FOR ANY SECURITIES. THE INITIAL PURCHASER AND THE CO-ISSUERS: (A) HAVE ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY COMMUNICATE OR CAUSE TO BE COMMUNICATED ANY INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 ("FSMA")) RECEIVED BY THEM IN CONNECTION WITH THE ISSUE OR SALE OF ANY SECURITIES IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO THE ISSUER; AND (B) HAVE COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY THEM IN RELATION TO THE SECURITIES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM. NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. vi

7 THE DISTRIBUTION OF THIS OFFERING CIRCULAR AND THE OFFER OR SALE OF SECURITIES MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. NONE OF THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER OR THE INITIAL PURCHASER REPRESENTS THAT THIS DOCUMENT MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY SECURITIES MAY BE LAWFULLY OFFERED, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN ANY SUCH JURISDICTION, OR PURSUANT TO AN EXEMPTION AVAILABLE THEREUNDER, OR ASSUME ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION OR OFFERING. IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE ISSUER, THE CO-ISSUER, THE COLLATERAL MANAGER OR THE INITIAL PURCHASER WHICH WOULD PERMIT A PUBLIC OFFERING OF ANY SECURITIES OR DISTRIBUTION OF THIS DOCUMENT IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. ACCORDINGLY, NO SECURITIES MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, AND NEITHER THIS OFFERING CIRCULAR NOR ANY ADVERTISEMENT OR OTHER OFFERING MATERIAL MAY BE DISTRIBUTED OR PUBLISHED IN ANY JURISDICTION, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS. PERSONS INTO WHOSE POSSESSION THIS OFFERING CIRCULAR OR ANY SECURITIES COME MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH RESTRICTIONS. THE TRUSTEE, THE FISCAL AGENT, THE COLLATERAL ADMINISTRATOR, THE PAYING AGENT AND THEIR RESPECTIVE AFFILIATES HAVE NOT PARTICIPATED IN THE PREPARATION OF THIS OFFERING CIRCULAR AND DO NOT ASSUME ANY RESPONSIBILITY FOR ITS CONTENTS. THE CO-ISSUERS ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS DOCUMENT OTHER THAN THE INFORMATION IN THE SECTION ENTITLED THE COLLATERAL MANAGER HEREIN. TO THE BEST KNOWLEDGE AND BELIEF OF THE CO-ISSUERS THE INFORMATION CONTAINED IN THIS DOCUMENT IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. THE COLLATERAL MANAGER ACCEPTS RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THE SECTION ENTITLED THE COLLATERAL MANAGER HEREIN. THE COLLATERAL MANAGER, HAVING TAKEN ALL REASONABLE STEPS TO ENSURE THAT THE INFORMATION CONTAINED IN THE ABOVE SECTION IS, TO THE BEST OF ITS KNOWLEDGE, IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT ITS IMPORT. AVAILABLE INFORMATION To permit compliance with Rule 144A under the Securities Act for resales of Securities, the Co-Issuers will make available to Holders and prospective purchasers who request such information, the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the time of the request either the Issuer or the Co- Issuer is not a reporting company under Section 13 or Section 15(d) of the Exchange Act or if either the Issuer or the Co-Issuer is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Copies of all such documents may be obtained free of charge from the office of the Trustee or, for so long as any Class of Notes is listed on any stock exchange, the Listing and Paying Agent, in each case as provided by the Issuer. Neither of the Co-Issuers expects to become such a reporting company or to be so exempt from reporting. vii

8 TABLE OF CONTENTS SUMMARY OF TERMS...1 RISK FACTORS...23 General; Priorities of Notes...23 Relating to the Securities...23 Relating to the Collateral Manager...30 Relating to the Collateral Obligations...32 Relating to Certain Conflicts of Interest...38 THE CO-ISSUERS...42 General...42 Activities...43 APPLICATION OF FUNDS...45 Application of Interest Proceeds...45 Application of Principal Proceeds...48 Payment of Management Fees to Successor Collateral Manager and Predecessor Collateral Manager...49 COVERAGE TESTS AND ADDITIONAL COLLATERAL DEPOSIT REQUIREMENT...50 General...50 The Overcollateralization Tests...50 The Interest Coverage Test...52 The Additional Collateral Deposit Requirement...53 CERTAIN ADDITIONAL PROVISIONS RELATING TO THE SECURITIES...55 General...55 Status and Security...55 Payments on the Notes...55 Distributions on the Income Notes...59 Determination of LIBOR...60 Optional Redemption...61 Special Redemption of Notes If the Collateral Manager Does Not Identify Investments as Contemplated by the Indenture...63 Mandatory Redemption of the Notes...63 Redemption of the Income Notes in Connection with Mandatory Redemption of the Notes...64 Certain Limitations on Payments on the Income Notes...64 Class A-1LR Commitment Fees...64 Class A-1LR Borrowings...65 Class A-1LR Prepayments...67 Reduction of Class A-1LR Commitments...68 Class A-1LR Purchaser Rating Criteria...68 Events of Default...70 Supplemental Indentures...73 Method of Payments...77 The Accounts...77 Note Valuation Report; Noteholder Reports...82 Notices...82 Certain Covenants...82 Cancellation...82 Page

9 No Gross-Up...83 Petitions for Bankruptcy...83 Subordination...83 Standard of Conduct...83 Actions of Holders Under the Indenture...84 Satisfaction and Discharge of Indenture...84 Trustee...84 Governing Law...84 Fiscal Agency Agreement...85 CERTAIN MATURITY AND PREPAYMENT CONSIDERATIONS...86 THE COLLATERAL MANAGER...89 General...89 Key Personnel of the Collateral Manager s Managing Member...89 THE MANAGEMENT AGREEMENT...92 General...92 Termination...94 Amendment...95 Disclosure and Consent Provisions Relating to "Principal Trades" and Certain Related Matters...95 SECURITY FOR THE NOTES...97 General...97 Collateral Obligations...97 Eligibility Criteria...99 The Collateral Quality Tests Ramp-Up Purchase of Collateral Obligations After the Revolving Period Dispositions of Collateral Obligations Certain Determinations Relating to Collateral Obligations Hedge Agreements Securities Lending SETTLEMENT AND CLEARING FOR GLOBAL SECURITIES Notes Income Notes Depositories TRANSFER RESTRICTIONS CERTAIN TAX CONSIDERATIONS United States Tax Considerations Tax Treatment of Issuer Tax Treatment of U.S. Holders of Notes Tax Treatment of U.S. Holders of Income Notes Tax Treatment of Non-U.S. Holders Information Reporting Requirements Circular CAYMAN ISLANDS TAX CONSEQUENCES CERTAIN ERISA CONSIDERATIONS...130

10 CERTAIN LEGAL INVESTMENT CONSIDERATIONS USE OF PROCEEDS PLAN OF DISTRIBUTION LISTING AND GENERAL INFORMATION CERTAIN LEGAL MATTERS GLOSSARY DEFINITION OF MOODY S RATING, MOODY S RECOVERY RATE AND RELATED DEFINITIONS... A-1 DEFINITION OF S&P RATING AND RELATED DEFINITIONS...B-1 FORM ADV PART II OF COLLATERAL MANAGER...C-1

11 SUMMARY OF TERMS The following summary of terms does not purport to be complete and is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this Offering Circular and the documents referred to in this Offering Circular. A Glossary appears at the back of this Offering Circular. Issuer... Denali Capital CLO VII, Ltd., a recently formed limited liability company incorporated under the laws of the Cayman Islands (the "Issuer"). The activities of the Issuer will be limited as described in "The Co-Issuers Activities The Issuer." Co-Issuer... Denali Capital CLO VII (Delaware) LLC, a recently formed limited liability company organized under the laws of the State of Delaware (the "Co-Issuer" and, together with the Issuer, the "Co-Issuers"). The Co-Issuer will have no substantial assets. Securities Offered... U.S.$150,000,000 aggregate principal amount of Class A-1LR Variable Funding Notes Due January 2022 (the "Class A-1LR Notes") to be drawn from time to time as described herein, U.S.$482,000,000 aggregate principal amount of Class A-1L Floating Rate Notes Due January 2022 (the "Class A-1L Notes" and, together with the Class A-1LR Notes, the "Class A-1 Notes"), U.S.$42,000,000 aggregate principal amount of Class A-2L Floating Rate Notes Due January 2022 (the "Class A-2L Notes" and, with the Class A-1 Notes, the "Senior Class A Notes"), U.S.$41,000,000 aggregate principal amount of the Class A-3L Floating Rate Notes Due January 2022 (the "Class A-3L Notes" and, with the Senior Class A Notes, the "Class A Notes"), U.S.$22,5000,000 aggregate principal amount of the Class B-1L Floating Rate Notes Due January 2022 (the "Class B-1L Notes") and U.S.$18,000,000 aggregate principal amount of the Class B-2L Floating Rate Notes Due January 2022 (the "Class B-2L Notes" and, with the Class B-1L Notes, the "Class B Notes" and, together with the Class A Notes and the Class B-1L Notes, the "Notes"). The Notes will be issued on the Closing Date pursuant to an indenture (the "Indenture"), to be dated as of May 22, 2007, among the Co- Issuers and Deutsche Bank Trust Company Americas, as trustee (the "Trustee") and as securities intermediary. The Notes will be nonrecourse obligations of the Co-Issuers or the Issuer, as applicable, and all amounts payable in respect of the Notes will be paid solely from and to the extent of the available proceeds from the Collateral. To the extent the Collateral is insufficient to pay all amounts due on the Notes, the Co-Issuers or the Issuer, as applicable, will have no further obligations in respect of such Notes and any sums outstanding and unpaid will be extinguished. On the Closing Date, the Issuer will also issue U.S.$57,350,000 notional amount of Income Notes Due January 2022 (the "Income Notes" and, together with the Notes, the "Securities"). The Income Notes will be issued pursuant to a deed of covenant (the "Deed of Covenant") dated as of the Closing Date and subject to the fiscal agency agreement with the Income Note Conditions attached thereto (the "Fiscal Agency Agreement" and, together with the Deed of Covenant and the Income Note Conditions, the "Income Note Documents"), to be dated as of the Closing Date, between the Issuer and Deutsche Bank AG, London Branch, as fiscal agent for the Income Notes. Distributions on the Income Notes will be paid 1

12 solely from and to the extent of the available proceeds from the distributions on the Collateral which is the only source of such distributions in respect of the Income Notes. To the extent the Collateral is insufficient to pay the Income Notes, the Issuer will have no obligation to pay any further amounts in respect of the Income Notes and any sums outstanding and unpaid will be extinguished. DC Funding Partners LLC ("DC Funding" or the "Collateral Manager") will manage the Collateral and perform certain other reporting functions pursuant to a collateral management agreement with the Issuer (the "Collateral Management Agreement"). See "The Collateral Manager" and "The Management Agreement." U.S.$4,175,000 in notional amount of the Income Notes are expected to be held initially by DC Funding, its Affiliates and certain employees of Denali Capital LLC ("Denali") who are Knowledgeable Employees with respect to the Issuer. See "The Collateral Manager" and "The Management Agreement." Stated Maturity... The stated maturity date of the Securities is the January 2022 Payment Date (the "Stated Maturity"). The Securities will mature at the Stated Maturity unless redeemed or, in the case of the Notes, repaid before that date. The weighted average life of each Class of Notes is expected to be less than the number of years until their Stated Maturity. See "Risk Factors Relating to the Notes The Weighted Average Lives of the Notes May Vary" and "Certain Maturity and Prepayment Considerations." Use of Proceeds... The net proceeds of the offering of the Securities received on the Closing Date, after payment of applicable fees and expenses, are expected to equal approximately U.S.$653,574,000 (assuming no Class A-1LR Borrowing on the Closing Date) and will be used by the Issuer to: purchase a portfolio of Collateral Obligations; fund a trust account for Revolving Loans (the "Revolving Reserve Account") and a trust account for Delayed Drawdown Loans (the "Delayed Drawdown Reserve Account") to cover future draws on Revolving Loans and, except to the extent permitted under the Indenture to be funded from draws on the Class A-1LR Notes, Delayed Drawdown Loans included in the initial Collateral; enter into any Hedge Agreements; enter into any Securities Lending Agreements (and correspondingly to fund the Securities Lending Account); enter into Synthetic Security agreements (and correspondingly to fund the related accounts); fund the Closing Date Expense Account and Expense Reimbursement Account; pay up-front fees relating to the Class A-1LR Notes pursuant to the Class A-1LR Note Purchase Agreement; and undertake certain related activities. 2

13 The Issuer expects that, as of the Closing Date, it will have purchased (or entered into commitments to purchase) at least $543,750,000 in Aggregate Principal Balance of the Collateral Obligations to be included in the anticipated portfolio as of the Ramp-Up Completion Date. The Issuer will acquire the Initial Collateral from various sources, including Denali Capital CLO I, Ltd., another collateralized loan obligation issuer, the portfolio of which was managed by the Collateral Manager, in each case, at established market prices prices acceptable to the Issuer. Any proceeds not invested in Collateral Obligations, deposited into the Revolving Reserve Account, Hedging Counterparty Collateral Accounts, Synthetic Security Collateral Accounts, Synthetic Security Counterparty Accounts, Securities Lending Accounts or the Delayed Drawdown Reserve Account or allocated for application as Interest Proceeds from time to time will be invested in Eligible Investments pending the use of such proceeds to purchase Collateral Obligations or other permitted applications of the proceeds. Form, Denominations and Record Dates.. The Class A Notes (other than the Class A-1LR Notes) and the Class B Notes offered and sold outside the United States pursuant to Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), initially will be evidenced by a temporary global note which will be exchangeable for a permanent global note with respect to such Class as described herein. The Income Notes offered and sold outside the United States pursuant to Regulation S under the Securities Act will be evidenced by one or more permanent physical share certificates in fully registered definitive form. The Class A Notes (other than the Class A-1LR Notes) and the Class B-1L Notes sold to Qualified Institutional Buyers and Qualified Purchasers pursuant to Rule 144A under the Securities Act will be issued in book-entry form only through the facilities of The Depository Trust Company. The Class A-1LR Notes and the Class B- 2L Notes offered and sold to Qualified Institutional Buyers and Qualified Purchasers will be issued only in definitive, registered form. The holders of the Class A-1LR Notes from time to time prior to the end of the Revolving Period will be required to be signatories to the Class A-1LR Note Purchase Agreement to be entered into among the Issuer, the Co-Issuer, Deutsche Bank Trust Company Americas, as initial Class A-1LR Note Agent (in that capacity, the "Class A-1LR Note Agent"), the purchasers of the Class A-1LR Notes and any conduit agents party thereto. The Income Notes are being offered and sold in the United States to persons that are (i) Qualified Institutional Buyers or Accredited Investors and (ii) Qualified Purchasers or Knowledgeable Employees with respect to the Issuer. The Income Notes offered and sold in the United States will be issued only in definitive, registered form. Any transfer of an Income Note to an Accredited Investor who is also a Knowledgeable Employee may be made only with the prior written authorization of the Collateral Manager (acting on behalf of the Issuer). See "Certain Additional Provisions Relating to the Securities Form, Registration, and Transfer of the Securities." 3

14 Subject to the foregoing, the Notes (other than the Class B-2L Notes) will be issued in minimum denominations of U.S.$200,000, and integral multiples of U.S.$1 in excess of that amount. The Class B-2L Notes will be issued in minimum denominations of U.S.$100,000, and integral multiples of U.S.$1 in excess of that amount. The Income Notes will be issued in minimum denominations of U.S.$100,000, and integral multiples of U.S.$1 in excess of that amount; provided that certain employees of Denali who are Knowledgeable Employees with respect to the Issuer may purchase Income Notes in minimum denominations of U.S.$25,000, and integral multiples of U.S.$1,000 in excess of that amount. No Securities will be issued in bearer form. The Securities are subject to certain restrictions on transfer. The record date (the "Record Date") for each Payment Date is the Business Day immediately preceding such Payment Date; provided, however, if Definitive Securities are issued, the Record Date for such Definitive Securities shall be 15 days (whether or not a Business Day) prior to such Payment Date. Class A-1LR Notes... General. The Co-Issuers expect to issue U.S.$150,000,000 in aggregate principal amount of Class A-1LR Notes to be drawn from time to time as described herein and to be secured by the Collateral pursuant to the Indenture. The Class A-1LR Notes are not expected to be funded on the Closing Date. The commitments (whether or not utilized) of a Holder of Class A-1LR Notes to fund a portion of each such Class A-1LR Borrowing are referred to herein as the "Class A- 1LR Commitments" of such Holder, which amount may be subject to a reduction as a result of the Note Payment Sequence Class A-1 as described herein, or as otherwise provided in the Indenture. The Class A-1LR Notes will be available for draws on a revolving basis during the Revolving Period in an aggregate principal amount at any one time outstanding of up to but not exceeding the Class A-1LR Commitments. The amount permitted to be drawn under the Class A- 1LR Notes at any time will be determined in part by application of the Collateral Quality Matrix as described herein. See "Coverage Tests and Additional Collateral Deposit Requirement General." The Class A-1LR Commitment Fees will accrue on the Class A-1LR Aggregate Undrawn Amount as determined daily for each day during each Periodic Interest Accrual Period during the Revolving Period at an annual rate of 0.17% (the "Class A-1LR Commitment Fee Rate") and will be payable in arrears on each Payment Date in accordance with the Application of Funds. Such commitment fees will be calculated on the basis of a year of 360 days and the actual number of days elapsed. Any Class A-1LR Commitment Fees accrued but not paid on prior Payment Dates shall accrue interest at the Applicable Periodic Rate with respect to the Class A-1LR Notes as determined for each Payment Date. After the Class A-1LR Required Borrowing relating to the termination of the Revolving Period, no other Class A-1LR Borrowings will be permitted and the Class A-1LR Commitments will thereafter equal the funded portion of the Class A-1LR Notes. Interest. The Class A-1LR Notes will provide for the payment of periodic interest ("Periodic Interest" with respect to the Class A-1LR Notes) (to the extent of funds available therefor as described herein) for each Periodic Interest Accrual Period (as defined herein) on the 4

15 drawn balance of the Class A-1LR Notes as determined daily for each day during each Periodic Interest Accrual Period at the rate of 0.26% per annum above the London interbank offered rate for three-month U.S. dollar deposits (or (i) for the period from the Closing Date to the first Payment Date, five-month U.S. dollar deposits or (ii) if a Periodic Interest Accrual Period with respect to the Class A-1LR Notes is less than three months, U.S. dollar deposits for such period of time described under "Certain Additional Provisions Relating to the Securities Determination of LIBOR") ("LIBOR") (determined as described herein) (the "Applicable Periodic Rate" with respect to the Class A-1LR Notes) on January 22, April 22, July 22 and October 22 of each year or, if any such day is not a Business Day, then on the next succeeding Business Day (each such date, a "Payment Date"), commencing on the October 2007 Payment Date. Interest will be calculated on the basis of a year of 360 days and the actual number of days elapsed. Payments of interest to the Class A-1LR Notes and the Class A-1L Notes will be payable pari passu between the Class A- 1LR Notes and the Class A-1L Notes as described herein. Principal. No principal will be payable in respect of the Class A-1LR Notes (and principal collections on the Collateral will be reinvested as described herein) during the Revolving Period, except in the event of a Class A-1LR Prepayment, an Optional Redemption, a Special Redemption (at the option of the Collateral Manager), a redemption made in connection with a Tax Event or a mandatory redemption of the Class A-1LR Notes caused by the failure to meet any of the Coverage Tests or a Rating Confirmation Failure. On any Payment Date on which the Class A-1LR Notes or the Class A-1L Notes receive a payment in respect of any of the foregoing (other than in connection with a Class A-1LR Prepayment), the Class A-1LR Commitments shall be reduced by an amount such that, after giving effect to such reduction in the Class A-1LR Commitments, the ratio of the Class A-1LR Commitments to the Aggregate Principal Amount of the Class A-1L Notes at such time is the same as it was immediately prior to such payment. Any reduction in the Class A-1LR Commitment will be applied to the Class A-1LR Notes pro rata in accordance with each Holder's Class A-1LR Commitment. On each Payment Date following the Revolving Period, the principal of the Class A-1LR Notes will be payable (to the extent of funds available therefor and in the order of priority described herein) until the Aggregate Principal Amount of the Class A-1LR Notes has been paid in full. In addition, all payments of principal on the Class A-1LR Notes that are made in connection with a Special Redemption or a mandatory redemption of the Class A-1LR Notes caused by a failure to meet any of the Coverage Tests or a Rating Confirmation Failure will be paid on a pro rata basis with the Class A-1L Notes as described herein. The Aggregate Principal Amount of the Class A- 1LR Notes, together with the other amounts described herein, will be due and payable at the Stated Maturity. See "Application of Funds," "Certain Additional Provisions Relating to the Securities Optional Redemption Notes," " Special Redemption of Notes If the Collateral Manager Does Not Identify Investments as Contemplated by the Indenture," " Mandatory Redemption of the Notes," " Payment on the Notes" and "Security for the Notes Ramp-Up." 5

16 Class A-1LR Borrowings. Each Holder of Class A-1LR Notes will commit to make advances to the Issuer during the Revolving Period, subject to compliance with the Class A-1LR Borrowing Conditions, upon not fewer than three Business Days notice or as otherwise described herein in an aggregate amount not to exceed such Holder s Class A-1LR Commitments. The Issuer may make Class A-1LR Borrowings from time to time on any Business Day during the Revolving Period, in accordance with the following terms: (i) the Issuer or the Collateral Manager on behalf of the Issuer shall provide notice of each Class A-1LR Borrowing to the Class A-1LR Note Agent at least (a) in the case of a Short Notice Borrowing to be made by a Swingline Holder, one Business Day, (b) in the case of a Short Notice Borrowing to be made by a Holder of Class A-1LR Notes other than a Swingline Holder, two Business Days, and (c) in the case of a Three-day Notice Borrowing, three Business Days, in each case prior to the related Class A-1LR Borrowing Date; (ii) except with respect to a Class A-1LR Required Borrowing, each Class A-1LR Borrowing shall be in a minimum amount of U.S.$1,000,000 from each Holder of Class A-1LR Notes or in an integral multiple of U.S.$200,000 in excess thereof (or the remaining available amount of the Class A-1LR Aggregate Undrawn Amount if such remaining amount is less than U.S.$1,000,000); (iii) each Class A-1LR Borrowing shall be made pro rata from each Holder of Class A-1LR Notes according to the Class A- 1LR Commitments as reflected on the books and records of the Class A-1LR Note Agent; and (iv) each Class A-1LR Borrowing shall be subject to the Class A- 1LR Borrowing Conditions and the applicable terms and conditions of the Class A-1LR Note Purchase Agreement and the Indenture. Each borrowing made under the Class A-1LR Notes is referred to herein as a "Class A-1LR Borrowing" and will be either a Short Notice Borrowing or a Three-day Notice Borrowing. "Short Notice Borrowing" means a Class A-1LR Borrowing with respect to which (a) a Swingline Holder is required to fund its Class A-1LR Advance on one Business Day's notice and (b) any Holder of Class A-1LR Notes other than a Swingline Holder is required to fund its Class A- 1LR Advance on two Business Days' notice. "Three-day Notice Borrowing" means a Class A-1LR Borrowing with respect to which each Holder of Class A-1LR Notes is required to fund its Class A- 1LR Advance on three Business Days' notice. The term "Class A- 1LR Borrowing Date" means each Business Day on which a Class A- 1LR Borrowing is made (including the Class A-1LR Required Borrowing Date); provided, however, that, in the case of any Class A- 1LR Required Borrowing in connection with termination of the Revolving Period specified in clause (iv) of the definition thereof, the Class A-1LR Borrowing Date will be a Business Day specified in the related Class A-1LR Borrowing Request occurring not earlier than three Business Days and not later than five Business Days after the 6

17 last day of the Revolving Period determined pursuant to such clause. It is not a condition to closing that the Issuer borrow any amount under the Class A-1LR Notes on the Closing Date. The interest accrued on the portion of the outstanding principal balance of the Class A-1LR Notes from a Class A-1LR Borrowing made after the end of the Due Period for the relevant Payment Date will not be payable on that Payment Date, but instead will be payable (along with interest thereon) on the next Payment Date in an amount equal to the related Class A-1LR Additional LIBOR Payment. In the case of a Short Notice Borrowing, (i) the Alternate Base Rate will apply on the Class A-1LR Advance made by a Swingline Holder during the period from and including the related Class A-1LR Borrowing Date until but excluding the third Business Day after such Swingline Holder's receipt of such Class A-1LR Borrowing Request; (ii) the amount of any requested Class A-1LR Borrowing for the purpose of funding the unfunded portions of the Revolving Loans or the Delayed Drawdown Loans may be up to, but shall not exceed, the Class A-1LR Undrawn Permitted Amount; and (iii) the Issuer shall endeavor, but is not obligated, to limit the amount of any requested Class A-1LR Borrowing for any other purpose to U.S.$2,000,000. Certain other conditions specified in the Class A-1LR Note Purchase Agreement may apply to a Short Notice Borrowing. The failure of the Issuer to make any Class A-1LR Borrowing for any reason will not constitute an Event of Default as described in clause (f) under "Certain Additional Provisions Relating to the Securities Events of Default" or a related Default. The Issuer shall be entitled to make a Class A-1LR Borrowing (not to exceed the Class A-1LR Undrawn Permitted Amount) to fund (x) unfunded commitment amounts of Revolving Loans and Delayed Drawdown Loans or (y) the purchase of any Collateral Obligation (other than a Revolving Loan or a Delayed Drawdown Loan) with respect to which the Issuer has entered into a commitment but has not settled the purchase. The Class A-1LR Required Borrowing will be required to be made in connection with the termination of the Revolving Period. On the Class A-1LR Required Borrowing Date, the Issuer will make a Class A-1LR Borrowing (such Class A-1LR Borrowing, the "Class A-1LR Required Borrowing") in the amount (not to exceed the Class A-1LR Undrawn Permitted Amount) equal to the sum of: the Collateral Obligation Funding Amount, and the Class A-1 Pro Rata Adjustment Amount. The Class A-1 Pro Rata Adjustment Amount will be applied as Principal Proceeds as described under "Application of Funds Application of Principal Proceeds"; provided that, if an Event of Default described in clause (e) or (g) under "Certain Additional Provisions Relating to the Securities Events of Default" has occurred, then the Holders of the Class A-1LR Notes shall not be required to advance any amounts in respect of the Class A-1LR Required Borrowing. 7

18 Class A-1LR Prepayments. Upon not fewer than three Business Days prior written notice from the Collateral Manager to the Trustee, the Co-Issuers, each Holder of Class A-1LR Notes and the Class A- 1LR Note Agent, principal amounts borrowed under the Class A-1LR Notes may be prepaid, in whole or in part, from Principal Proceeds (such payment, a "Class A-1LR Prepayment"), at the election of the Collateral Manager on any Business Day during the Revolving Period, other than a date from and including a Determination Date through and including the immediately succeeding Payment Date, or, if such Class A-1LR Prepayment occurs on a Payment Date, to the extent available for application as described under clause (3) of "Application of Funds Application of Principal Proceeds." No Class A-1LR Notes may be prepaid unless all Prepayment Costs (and interest thereon) (provided that the applicable Holder of the Class A- 1LR Notes has calculated such Prepayment Costs and given notice thereof as provided in the Class A-1LR Note Purchase Agreement) as of the immediately preceding Payment Date have been paid in full on or before the date of such Class A-1LR Prepayment. If Prepayment Costs are not paid on the relevant Payment Date, then interest on such Prepayment Costs shall accrue at the Applicable Periodic Rate then in effect on the Class A-1LR Notes (compounded on the succeeding Payment Dates), from such relevant Payment Date until such Prepayment Costs are paid in full to the Class A-1LR Holder. With respect to any Class A-1LR Prepayment made during any Periodic Interest Accrual Period in which more than one draw on the Class A- 1LR Notes was made, the Class A-1LR Prepayment shall be made among such drawn Class A-1LR Notes in the priority directed by the Collateral Manager. Class A-1LR Purchaser Rating Criteria. The "Class A-1LR Purchaser Rating Criteria" will be satisfied with respect to any Person as of any specified date if the short-term debt, deposit or similar obligations of such Person are on such date rated at least (x) "P-1" (and if rated "P-1", not on credit watch for possible downgrade) by Moody's and (y) "A-1" by S&P (provided, however, that, if such Person is a conduit purchaser, such Person's obligations under the Class A-1LR Note Purchase Agreement must be supported by a guarantor or liquidity provider which is rated at least "A-1" by S&P). The Class A-1LR Purchaser Rating Criteria will not apply after the Revolving Period. The Class A-1LR Note Purchase Agreement will provide that if any Holder of Class A-1LR Notes fails to satisfy the Class A-1LR Purchaser Rating Criteria, it shall (so long as it continues to satisfy the Moody's Class A-1LR Collateralization Criteria), within the thirty calendar day period (the "Initial Cure Period") following the delivery or receipt of the notice of such failure make all reasonable efforts, in good faith, subject to satisfaction of the Rating Condition with respect to each Rating Agency, to deliver to the Trustee collateral (which collateral will consist of Eligible Collateral (as defined in the Class A- 1LR Note Purchase Agreement) and any such other property as may be agreed by the Rating Agencies and such Holder of Class A-1LR Notes (such collateral, the "Posted Collateral"), pursuant to terms to be agreed by such Holder of Class A-1LR Notes and the Rating Agencies and as further stipulated in the Class A-1LR Note Purchase Agreement, to secure its obligations to the Issuer to fund future draws 8

19 (the "Collateralization Option"); provided that if such Holder of Class A-1LR Notes after making such reasonable efforts determines that it will be unable to effect the Collateralization Option, it may at its option (or it may, at its option, in lieu of effecting the Collateralization Option) (i) have its obligations guaranteed by an entity which satisfies the Class A-1LR Purchaser Rating Criteria (any such entity, a "Guarantor") through a guarantee satisfying the thencurrent guidelines of the Rating Agencies, (ii) enter into a liquidity facility with a financing provider which satisfies the Class A-1LR Purchaser Rating Criteria (any such financing provider, a "Funding Entity") (provided that the Rating Condition with respect to each Rating Agency must be satisfied with respect to any Guarantor and any Funding Entity) or (iii) transfer its Class A-1LR Notes in accordance with the Class A-1LR Note Purchase Agreement. Any action taken pursuant to items (i), (ii) or (iii) hereof, is referred to as a "Noteholder Cure." If a Holder of Class A-1LR Notes does not effect a Collateralization Option and does not effect any other Noteholder Cure, or if such Holder of Class A-1LR Notes otherwise fails to satisfy the Moody's Class A-1LR Collateralization Criteria, such Holder of Class A-1LR Notes will, by no later than the second Business Day after the end of the Initial Cure Period or the date on which it fails to satisfy the Moody's Class A-1LR Collateralization Criteria, make a Downgrade Advance. As used herein, the "Moody's Class A-1LR Collateralization Criteria" will be satisfied with respect to any Person as of any specified date if the short-term debt, deposit or similar obligations of such Person are on such date rated at least "P-2" and if rated "P-2" are not on credit watch for possible downgrade by Moody's. See "Certain Additional Provisions Relating to the Securities Class A-1LR Purchaser Rating Criteria." Class A-1L Notes... General. The Co-Issuers expect to issue approximately U.S.$482,000,000 in aggregate principal amount of Class A-1L Notes to be secured by the Collateral pursuant to the Indenture. Interest. The Class A-1L Notes will provide for the payment of Periodic Interest (to the extent of funds available therefor as described herein) for each Periodic Interest Accrual Period at the rate of 0.23% per annum above three-month LIBOR (or, for the period from the Closing Date to the first Payment Date, five-month LIBOR) (the "Applicable Periodic Rate" with respect to the Class A-1L Notes) on each Payment Date, commencing on the October 2007 Payment Date. Interest will be calculated on the basis of a year of 360 days and the actual number of days elapsed. Payments of interest to the Class A- 1L Notes and the Class A-1LR Notes will be payable pari passu among the Class A-1L Notes and the Class A-1LR Notes as described herein. Principal. No principal will be payable in respect of the Class A-1L Notes (and principal collections on the Collateral will be reinvested as described herein) during the Revolving Period, except in the event of an Optional Redemption, a Special Redemption (at the option of the Collateral Manager), a redemption made in connection with a Tax Event or a mandatory redemption of the Class A-1L Notes caused by the failure to meet any of the Coverage Tests or a Rating 9

20 Confirmation Failure. On each Payment Date following the Revolving Period, the principal of the Class A-1L Notes will be payable (to the extent of funds available therefor and in the order of priority described herein) until the Aggregate Principal Amount of the Class A-1L Notes has been paid in full. In addition, all payments of principal on the Class A-1L Notes that are made in connection with a Special Redemption or a mandatory redemption of the Class A-1L Notes caused by a failure to meet any of the Coverage Tests or a Rating Confirmation Failure will be paid on a pro rata basis with the Class A-1LR Notes as described herein. The Aggregate Principal Amount of the Class A-1L Notes, together with the other amounts described herein, will be due and payable at the Stated Maturity. See "Application of Funds," "Certain Additional Provisions Relating to the Securities Optional Redemption Notes," " Special Redemption of Notes If the Collateral Manager Does Not Identify Investments as Contemplated by the Indenture," " Mandatory Redemption of the Notes," " Payment on the Notes" and "Security for the Notes Ramp-Up." Class A-2L Notes... General. The Co-Issuers expect to issue approximately U.S.$42,000,000 in aggregate principal amount of Class A-2L Notes to be secured by the Collateral pursuant to the Indenture. Interest. No interest will be payable in respect of the Class A-2L Notes on any Payment Date unless the Holders of the Class A-1 Notes have been paid the Cumulative Interest Amount due to them on such Payment Date. The Class A-2L Notes will provide for the payment of Periodic Interest (to the extent of funds available therefor as described herein) for each Periodic Interest Accrual Period at the rate of 0.43% per annum above three-month LIBOR (or, for the period from the Closing Date to the first Payment Date, five-month LIBOR) (the "Applicable Periodic Rate" with respect to the Class A-2L Notes) on each Payment Date, commencing on the October 2007 Payment Date. Interest will be calculated on the basis of a year of 360 days and the actual number of days elapsed. Principal. No principal will be payable in respect of the Class A-2L Notes (and principal collections on the Collateral will be reinvested as described herein) during the Revolving Period, except in the event of an Optional Redemption, a Special Redemption (at the option of the Collateral Manager), a redemption made in connection with a Tax Event or a mandatory redemption of the Class A-2L Notes caused by the failure to meet any of the Coverage Tests or a Rating Confirmation Failure. Following the Revolving Period, on each Payment Date after which the Class A-1 Notes are paid in full, the principal of the Class A-2L Notes will be payable (to the extent of funds available therefor and in the order of priority described herein) until the Aggregate Principal Amount of the Class A-2L Notes has been paid in full. The Aggregate Principal Amount of the Class A-2L Notes, together with the other amounts described herein, will be due and payable at the Stated Maturity. The Class A-2L Notes are subordinated in right of payment to the Class A-1 Notes to the extent described herein. 10