Cdos

Conventional CDO Versus Synthetic Portfolio Return Tranche SS A B C

1,000 2.30% Conventional Notional Percentage Spread

Rating AAA AA BBB

770 140 50

Total

960

Portfolio Income Portfolio Funding Cost Expenses and Losses Difference Equity Equity Spread

77.0% 14.0% 5.0%

0.45% 1.00% 3.00%

Synthetic Notional 750 110 50 50

0.64%

960

23,000,000 6,110,400 12,000,000 4,889,600 40 12.22%

Percentage Spread 75.0% 11.0% 5.0% 5.0%

0.15% 0.45% 1.00% 3.00%

0.362% 23,000,000 3,475,200 12,000,000 7,524,800

18.81%

CDO Overcollateralisation Effects

Start of Deal Par Value Required O/C Actual O/C A B C Equity Total

AAA BBB B NR

70 16 4 10 100

125% 108% 100%

After Loss Par Value

143% 116% 111%

Total

70 16 4 2 92

8 Actual O/C 131% 107% 102%

Pay Down Class A Par Value Actual O/C 64 16 4 2 86

134% 108% 102%

Standard & Poor's Rated Overcollateralisation (ROC) Benchmark Assets : Senior & Subordinated Loans Minimum Weighted Recovery AAA Default Rate (Scenario) BBB Default Rate (Scenario) Liabilities : Class A (AAA) Class B (BBB) Prefs (U/R) Total

300 35% 36% 24%

240 36 24 300

ROC Calculation: AAA BBB Current Collateral & Cash Balance 300 300 Plus Expected Recoveries on Defaulted Assets 0 0 Minus Expected Gross Defaults (EGD) 108 72 Plus Recoveries on EGD 37.8 25.2 Plus Expected Net Excess Spread 33 29 (1) Potential Total Cash Flow 262.8 282.2 (2) Supported Liabilities (A and A+B) 240 276 ROC (1/2) 109.5% 102.2% Conventional O/C 125% 108.7% So, ROC takes into account defaults (given a rating scenario), recoveries, and excess spread.

Market Value CDO Advance Rates, Overcollateralisation and Minim Tranches : Notes Senior Facility Senior Notes Senior Subordinated Subordinated Equity Total

Rating AA AA A BBB NR

Amount 400 200 120 80 200 1000

% 40% 20% 12% 8% 20% 100%

AA Tranche Bank loans MV >90% Investment Grade Corporate Bonds Bank Loans BB- MV 70-80% Bank loans CCC+ Equity Total Total Senior Debt Face Value Borrowing Amount Surplus Overcollateralisation

MV 180 70 500 100 150 1000

% Advance Rate 18% 90% 7% 88% 50% 75% 10% 60% 15% 50% 100%

MV 180 70 500 100 150 1000

% Advance Rate 18% 91% 7% 91% 50% 85% 10% 72% 15% 71% 100%

MV 180 70 500 100 150 1000

% Advance Rate 18% 93% 7% 94% 50% 87% 10% 79% 15% 78% 100%

A Tranche Bank loans MV >90% Investment Grade Corporate Bonds Bank Loans BB- MV 70-80% Bank loans CCC+ Equity Total Total Senior Debt Plus Senior Sub. Borrowing Amount Surplus Overcollateralisation

BBB Tranche Bank loans MV >90% Investment Grade Corporate Bonds Bank Loans BB- MV 70-80% Bank loans CCC+ Equity Total Total Debt Borrowing Amount Surplus Overcollateralisation

eralisation and Minimum Net Worth Advance Rates : Cash Govt Secs 2-10 Year Bank loans MV >90% Investment Grade Corp Bonds. Bank Loans MV 80-90% BBBank Loans MV 70-80% BBBank Loans CCC+ Investment Grade CB's Non investment Grade CB's Equity

AAA 100% 95% 86% 85% 73% 69% 52% 60% 52% 40%

Advance Amount 162 61.6 375 60 75 733.6 600 133.6 122%

AA Minimum Net Worth Test Bank loans MV >90% Investment Grade Corporate Bonds Bank Loans BB- MV 70-80% Bank loans CCC+ Equity Total Minus Debt Net Worth Minimum Net Worth (60%) Is Test Met ?

180 70 500 100 150 1000 800 200 120 Yes

Advance Amount 163.8 63.7 425 72 106.5 831 720 111 115%

A Minimum Net Worth Test Bank loans MV >90% Investment Grade Corporate Bonds Bank Loans BB- MV 70-80% Bank loans CCC+ Equity Total Minus Debt Net Worth Minimum Net Worth (45%) Is Test Met ?

180 70 500 100 150 1000 800 200 90 Yes

Advance Amount 167.4 65.8 435 79 117 864.2 800.00 64.2 108%

BBB Minimum Net Worth Test Bank loans MV >90% Investment Grade Corporate Bonds Bank Loans BB- MV 70-80% Bank loans CCC+ Equity Total Minus Debt Net Worth Minimum Net Worth (30%) Is Test Met ?

180 70 500 100 150 1000 800 200 60 Yes

AA 100% 95% 90% 88% 81% 75% 60% 70% 64% 50%

A 100% 95% 91% 91% 87% 85% 72% 80% 76% 71%

BBB 100% 95% 93% 94% 90% 87% 79% 85% 81% 78%

BB 100% 95% 94% 94% 92% 89% 85% 80% 78% 78%

B 100% 100% 96% 96% 92% 89% 82% 90% 88% 85%

This spreadsheet is for internal use only by Deutsche Bank Global Markets employees. The material (including formulae) is provide under no circumstances be used for client pricing. Examples, case studies, exercises and solutions may use simplifying assumpti from Deutsche Bank proprietary models actually used. The publication is provided to you solely for information purposes and is n purchase or sale of any financial instrument or product. The information contained herein has been obtained from sources believe and its accuracy cannot be guaranteed.

aterial (including formulae) is provided for education purposes only and should utions may use simplifying assumptions that do not apply in practice, and may differ ly for information purposes and is not intended as an offer or solicitation for the been obtained from sources believed to be reliable, but is not necessarily complete