MILBANK, TWEED, HADLEY & McCLOY PIONEERS
VARIABLE FUNDING NOTE IN EUROPEAN CDO MARKET

€273 Million Copernicus Euro CDO-II B.V. Uses Innovative Structure

LONDON, ENGLAND, April 28, 2003 – Capitalizing on its expertise in both U.S. and U.K. law, the international law firm Milbank, Tweed, Hadley & McCloy LLP has closed the €273 million Copernicus Euro CDO-II B.V., in a precedent-setting use of the Variable Funding Note (VFN) technique in the European CDO markets. Led by London partners Tom Siebens and John Walker, Milbank represented J.P. Morgan Securities Ltd. as arranger, lead manager and placement agent and JPMorgan Chase Bank as trustee and collateral administrator.

Copernicus Euro CDO-II B.V., a Dutch special purpose company, issued €273 million of fixed, floating and zero coupon secured notes, including subordinated and combination notes, in nine investment grade and high yield tranches. Net proceeds from the offering will be used to acquire collateral debt obligations, including senior secured loans, mezzanine obligations, unsecured loans and structured finance securities as well as related currency and interest rate hedge transactions. €80 million of proceeds were applied on the closing date. The balance of proceeds will be applied toward the purchase of additional collateral debt obligations and related hedge transactions during an acquisition period of up to 30 months.

Commenting on the transaction, Milbank’s Siebens stated, “Drawing upon our significant expertise in the U.S. and European CDO markets and our traditional strength in securitisation and capital markets in London gave us the ability to adapt the typical CDO structure to investors’ needs. During the acquisition period, funding can take the form of drawdowns under the most senior note, which is structured as a variable funding note, in place of the more customary revolving credit facility. While the VFN technique is well-established in the U.S. CDO market, this is the first time it has been used in the European CDO market.”
The Milbank team representing the manager and trustee in negotiating and structuring the transaction included structured finance partners Tom Siebens and John Walker, banking of counsel Patrick Holmes and European tax partner Russell Jacobs in London and U.S. tax partner Andrew Walker and employee benefit plans partner Fred Kneip in New York.

Milbank’s London office is well known for its technical expertise and ability to develop sophisticated and innovative financing structures to meet complex financing needs for both public and private offerings. The Group’s capabilities encompass the full range of capital markets products, including fixed and floating rate, convertible, exchangeable and capital bonds and bonds with warrants. Through the integration of English and U.S. lawyers, Milbank’s London attorneys have been involved in a number of highly structured financings, including asset-backed and structured financings, acquisition financings, project financings, transportation financings, funds, CLO/CBOs and derivatives. Milbank provides counsel for all of the key parties involved in public and private debt and equity offerings, and has played a lead role in the underwriting of bridge financings, trade receivables securitisations and high yield offerings.