2005 Esoteric Asset-Backed Securities Investor Briefing

Sofitel Hotel, New York

June 23, 2005

Speakers

Taimur Jamil: Julia Tung: McGinnis Caldwell: Christophe Razaire: Stephen Macy: Olga Filipenko: Parla Ozgediz: Michael McDermitt: Kent Becker:

Wireless Towers Life Insurance Tobacco Settlements Tobacco Litigation Update Legal Issues Intellectual Property Aircraft Small Business Loans Equipment Leases
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Wireless Towers

Presented by: Taimur Jamil Asset Finance Group

June 23, 2005

Wireless Towers (I)

What are wireless towers?

Tall metallic structures Pivotal for wireless communications

Who owns them?

Infrastructure developed by Wireless Service Providers Decision to dispose off non-critical assets Aggregation of tower portfolios by new entrants
Crown Castle, American Tower, SpectraSite, SBA and Global Signal
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Wireless Towers (II)

What is being securitized?

Revenues from underlying leases between wireless tower companies and wireless service providers Proprietary networks (Dispatch services, government networks, TV/Radio broadcasters)

Why securitization?
Lower cost of funds
Favorable interest rate environment Retire high yield debt, recapitalize balance sheet

Portfolio acquisition financing

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Transactions to Date

3 transactions to date raising a total of $2.61 billion in tranched investment and noninvestment grade debt
Global Signal
Global Signal Trust I, Series 2004-I ($418 mil) Global Signal Trust II, Series 2004-II ($290 mil)

Crown Castle
Crown Castle Towers LLC, Series 2005-1 ($1.9 bil)

A Tower that is Aesthetically Appealing

Wireless Technology

What constitutes wireless technology?

Telephony Land Mobile Radio / Specialized Mobile Radio Paging Other Data Services Broadcasting

Telephony is the most dominant and prevalent revenue source All other revenue sources considered declining
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Wireless Technology

What is driving the need for wireless services?

Infrastructure easy to deploy Increased usage and prevalence of cellular phones Trend towards mobile computing resulting in
Greater demand for bandwidth

Seamless integration with Wi-Fi networks Compatibility among different standards such as GSM and CDMA

Wireless Technology

What are the associated technology risks?

Satellite communications
Currently exists such as Motorolas Iridium service which has a constellation of 77 LEO satellites Wide spread market acceptance not forthcoming due to high usage costs and bulky equipment
Usage limited to niche specialties to remote communication such as news reporting

Potential health concerns

Wireless service a commoditized necessity

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Single Tower Cash Flow Mechanics

Initial investment of $200,000 - $300,000 by owner On-going expenses minimal With 2 tenants cash flows are Ebitda positive
Basic One Tower Model Number of Tenants on Tower Revenue (~ $1,600 per month) Direct Operatign Cost Tower Gross Profit Gross Profit Margin SG&A EBITDA EBITDA Margin Maintenance Capex Free Cash Flow Free Cash Flow Margin 1 19,200 13,000 6,200 32.3% 7,300 (1,100) -5.7% (4,000) (5,100) -26.6% 2 38,400 13,260 25,140 65.5% 7,300 17,840 46.5% (4,000) 13,840 36.0% 3 57,600 13,525 44,075 76.5% 7,300 36,775 63.8% (4,000) 32,775 56.9%

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How does Moodys Evaluate the Cash Flows?

Ascertain the sustainable level of cash flow over the life of the debt
Evaluate firms operating performance Comparable public company and market data

Determine the net present value of the future flows And an appropriate advance rate based on LTV and Debt Service Coverage Ratio
Like other asset back transactions liability structure also modeled
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How does Moodys Evaluate the Cash Flows?

Revenue
Correlated to the number of tenants per tower
Industry average is 2.5 tenants This is a function of the location of the towers, population density and management strategy

Evaluate underlying tenant leases

Duration of leases Composition of tenants Built-in rent escalators (2% to 5% per annum)

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How does Moodys Evaluate the Cash Flows?

Revenue
Tenant attrition
Minimal since service providers optimize their networks for a particular geographic area Barriers to entry are high, since it is difficult to build new structures due to zoning restrictions Associated moving costs (~$30,000 to $50,000) far outweigh rent escalator increments

Tenant concentration
Majority of revenue derived from few tenants
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How does Moodys Evaluate the Cash Flows?

Revenue
Impact of mergers
Each service provider operates on a specific frequency spectrum Equipment is not dual use and cannot be consolidated Merger benefits realized through consolidation of other support functions (marketing, etc) Wireless tower revenues not impacted; Demand for more bandwidth will fuel request for space

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How does Moodys Evaluate the Cash Flows?

Expenses
Direct operating expenses
Industry Ebitda margins range from 40% to 75% Correlated to managements expertise and size of the company

Maintenance capital expenditures

Per tower capital expenditure estimated at $3000 to $5000 per tower per annum Evaluated on a case by case basis Lower estimates used for the rated transactions
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How does Moodys Evaluate the Cash Flows?

Expenses
Management fee
For the rated transaction a management fee equal to 10% of revenue was used Must be sufficient enough to retain another manager if the existing manager needs to be replaced

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How does Moodys Evaluate the Cash Flows?

Refinancing and the Anticipated Refinancing Date

Our assumption is that refinancing does not occur Assets continue to operate on an as-is basis with additional interest penalties Rating addresses whether bonds will be repaid by legal final maturity

Discount rates
Range of 10% to 13% - reflects our view on the riskiness of the cash flows

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How does Moodys Evaluate the Cash Flows?

Advance rate
LTV for different rated tranches
Liability structure must hold under all valuation stresses
Ratings
Aaa Aa2 A2 Baa2 Baa3 Ba1 Ba2 Ba3 and Below

LTV Range
35% - 46% 43% - 53% 51% - 60% 59% - 65% 62% - 67% 66% - 70% 72% - 75% > 76%
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Structural and Legal Provisions

Bells and whistles just like any structured transaction Environmental reviews on all sites No pending litigation Clear record from the FAA and FCC pertaining to non-compliant activities For the rated transactions 70% of revenue derived from sites where an estoppels had been obtained Appropriate reserves
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Structural Flexibility in Rated Transactions

Site acquisition account Property release provisions Property substitution Issuance of additional notes

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Conclusion: Not Just by the Numbers

Analysis driven by quantitative and qualitative factors such as:

Market trends Asset and sponsorship qualities Loan structural characteristics

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Life Insurance

Presented by: Julia Tung Asset Finance Group

June 23, 2005

Life Insurance Products

Four Types of Securitizations: Life or Senior Settlements Life Insurance/Life Annuity Corporate or Bank Owned Life Insurance Commissions (COLI/BOLI) Life Insurance Premium Finance

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Life Settlements

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What is a Life Settlement?

Individual generally over age 65 sells life insurance policy at a discount of face amount Insured has shortened life expectancy (LE) compared to general population (e.g. LE of 2-12 years) Insured typically does not have a single impairment Face amount range of $250,000 to $10 million Funding for purchase provided through warehouse facility or institutional funding
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Issuance in the ABS Market

Several warehouse facilities outstanding not rated by Moodys One term transaction rated by Moodys
Legacy Benefits 2004-1 (2/25/04)
Class A ($61.5 million) rated A1 Class B ($8.5 million) rated Baa2

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What are the Primary Risks in a Life Settlement Deal?

Legal/Regulatory Life Settlement Company/Servicer Credit of insurance companies and other entities Timing of cash flows
Mortality analysis Pool analysis Analysis of policies Structure

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Risks in a Life Settlement Deal: Life Settlement Company/Servicer

What is the companys background? What is the companys origination policy? Is the servicer a viable entity? Is there a viable back-up servicer? Does the servicer/back-up have the appropriate licenses to originate and service?

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Risks in a Life Settlement Deal: Credit of Insurance Companies and Other Entities

Rating of insurance policy providers Concentration of insurance policy providers Rating of any other related entities, e.g. annuity provider, supplemental insurance provider, etc.

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Risks in a Life Settlement Deal: Timing of Cash flows (Part 1)

Mortality Analysis
Base mortality table for male/female and smoker/non-smoker (e.g. 2001 VBT table) Adjustment to mortality supplied by medical underwriter Verification of mortality expectations from a third party

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Risks in a Life Settlement Deal: Timing of Cash flows (Part 2)

Pool Analysis
Number of lives in the pool Relative size of policies Diversification of ailments Geographic diversification (regulatory concern)

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Risks in a Life Settlement Deal: Timing of Cash flows (Part 3)

Analysis of policies
Type of insurance policy
universal/variable/whole/term

Premium schedule Cash reserves Past the period of contestability

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Risks in a Life Settlement Deal: Timing of Cash flows (Part 4)

Structure
How will premium/interest payments be covered given the uncertain timing of the death benefits? Possible solutions: reserve account, annuities, policy to cover life extension risk, etc. Will a sufficient number of policies have paid out by the legal final?

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Risks in a Life Settlement Deal: Timing of Cash flows (Part 5)

Monte Carlo Simulation

Stress the mortality rates Magnitude of stress may depend on
Number of lives in the pool Life expectancy of insured Confidence in medical underwriting Size of policy

If premiums are not fixed, stress the increase in premium payments

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Life Insurance/ Life Annuity

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What is a Life Insurance/Life Annuity Transaction?

New life insurance policy is purchased on a healthy senior over the age of 70 Securitization proceeds are used to purchase fixed annuities to cover interest and premium payments and additional coverage Residual goes to insureds designation (typically charity or family member)

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Cash Flows of a Life Insurance/Life Annuity Deal:

Proceeds from Investors

Purchase Supplemental Policies Purchase Annuity

Fund Reserve Account

Annuity Payments

Bond Interest, Life Insurance Premiums & Trustee Expenses

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What are the Economics Behind the Deal?

Annuity payments and premiums/bond interest are perfectly matched no mortality analysis Insurers/reinsurers and annuity companies have very different views of mortality of healthy seniors Arbitrage will narrow as more data appears

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Life Insurance/Life Annuity Deals Involving Charities

Moodys has rated six transactions to date from one issuer Issuance has stopped because of proposed legislation
crack down on abuses in certain life insurance contracts involving tax-exempt organizations 25% excise tax on death benefits (Bush administrations proposed FY 2006 budget) 100% excise tax on acquisition costs of any interest in an applicable insurance contract (Grassley-Baucus Bill)
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Other Life Insurance/Life Annuity Proposals

Moodys has reviewed several proposals in which life policies are purchased by individuals in exchange for a cash payment or a small portion of the death benefit So far no deal has closed because of legal concerns
wet ink policies Insurable interest Fraud and contestability

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Tobacco Settlements

Presented by: McGinnis Caldwell Asset Finance Group

June 23, 2005

Introduction

Revenue under Master Settlement Agreement (MSA) Tobacco Legal Fees Revenue Associated with Tobacco Quotas

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MSA Revenue Asset Characteristics

The MSA was entered into in November 1998 by 46 states, DC, Puerto Rico, U.S. territories and four major US Tobacco Companies MSA ended litigation between the states and the Tobacco Companies for smoking related injuries in exchange for payments to be made to the states in perpetuity

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MSA Revenue Deals Rated by Moodys

Since 1999

42 transactions rated, includes

15 state deals 23 city and county deals 4 US territory deals and Washington DC

Ratings: Currently Baa1 to Ba1 on senior tranches (mostly Baa3), all on review with direction uncertain
Subordinate tranches rated mostly Ba2

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Tobacco Legal Fee Asset Characteristics

Outside counsel for a specific state must agree to have fees set by negotiation with the tobacco companies, subject to an aggregate $1.25 billion cap or by an arbitration panel Arbitrated fees are subject to national cap of $125 million per quarter and $500 million per annum Each of tobacco companies is severally obligated for a portion of quarterly payments corresponding to market share, adjusted annually

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Tobacco Legal Fee Asset Characteristics

Future tobacco class action lawyers may elect to have their fees determined by arbitration and included under the quarterly and annual caps above This inclusion would result in the extension of securitized legal fees. This is an opt-in extension risk

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Legal Fee Revenue Deals Rated by Moodys

Since 2001, state counsel for following states have securitized

California, Florida, Hawaii, Illinois, Massachusetts, Mississippi, Ohio and Texas

Ratings: Currently Aa3 to Baa2 on senior tranches; Baa3 on subordinate

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Tobacco Quota Revenue Asset Characteristics

The Fair and Equitable Tobacco Reform Act of 2004 (the Buyout Legislation) eliminates the current federal tobacco price support and quota programs Secretary of Agriculture, through Commodity Credit Corporation, enters into a contract with each tobacco quota holder in exchange for the termination of tobacco marketing quotas and price supports $10 billion paid over 10 years

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Tobacco Quota Revenue Concerns

Full faith and credit? Release of prior liens? Assignability?

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Tobacco Quota Deals Rated by Moodys

None

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MSA Revenue Stream Features

Aggregate Base MSA Payments Initial Payments (January 10) $2,400,000,000 2,472,000,000 2,546,160,000 2,622,544,800 2,701,221,144 Annual Payments (April 15) $0 4,500,000,000 5,000,000,000 6,500,000,000 6,500,000,000 8,000,000,000 8,000,000,000 8,139,000,000 Strategic Contribution (April 15) Total Payments Before Adjustments $2,400,000,000 6,972,000,000 7,546,160,000 9,122,544,800 9,201,221,144 8,000,000,000 8,000,000,000 9,000,000,000

Year 1998 1999 2000 2001 2002 2003 2004 2007 2008

861,000,000

2017 2018

8,139,000,000 861,000,000 9,000,000,000 9,000,000,000 9,000,000,000 $9 Billion Annual Payments Continued in Perpetuity

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MSA Revenue Stream Features

These Base Payments are subject to adjustments. The three primary adjustments are described below:
Inflation Adjustment - The Base Payments are to be increased each year by the greater of 3% or the actual Consumer Price Index Volume Adjustment - The Base Payments are to be increased or decreased according to the amount of cigarette shipments relative to the amount of shipments in 1997 (475.7 billion cigarettes)

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MSA Revenue Stream Features

Previously Settled States Reduction - The Base Payments are reduced by the set percentages below:
2000-2007 2008-2017 12.45% 12.24%

2018 and after 11.07%

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MSA Revenue Stream Features

MSA Payments
35 30 25

$ Billions

20 15 10 5 0 2003 2008 2013 2018 2023 2028 2033 2038 2043

Base Payments After Inflation After Inflation and Consumption (1) After Inflation, Consumption (1) and Previously Settled States

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MSA Revenue Stream Features

Two adjustments contributing to potentially significant downward pressure on base payments

Volume adjustments: long term cigarette consumption trends Size of non-participating manufacturer (NPM) market and necessity of NPM adjustment

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MSA Revenue Stream: Volume Adjustment

Year 2004 2003 2002 2001 2000 1999 1998 Consumption (Billions) ~393 400 415 425 430 435 465 Percentage Change -1.75% -3.61% -2.35% -1.16% -1.15% -6.45% -3.13%
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MSA Revenue Stream: NPM Adjustment

Loss of market share (Currently, Original Manufacturers ~85%, Subsequent Manufacturers ~7%, NPMs ~8%) Independent consultant makes a significant factor determination Model Statute is not being diligently enforced

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NPM Adjustment: Diligent Enforcement

Enforcement of escrow statutes Repeal of the allocable share release loophole Equity assessments Monitoring NPMs via annual certifications

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Freedom Holdings, Inc. v. Eliot Spitzer

Challenges the MSA, Model Statute and NYs Escrow Statute Claims that MSA violates the Sherman Antitrust Act as an output cartel that protects OPMs by penalizing SPMs for exceeding original market shares and penalizing NPMs through Escrow Statutes

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Freedom Holdings, Inc. v. Eliot Spitzer

Lawsuit dismissed May 15, 2002 based on theory of governmental immunity Second Circuit Court of Appeals reversed trial court decision in January 2004 District Court denied a preliminary injunction against enforcement of Escrow Statute in September 2004 but grants preliminary injunction against the repeal of allocable share. Plaintiffs appeal In June 2005, appellate court affirms denial of preliminary injunction
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Freedom Holdings, Inc. v. Eliot Spitzer

Appellate court did not really give guidance on the law, which would have provided grounds for motion for summary judgment Discovery proceedings continue in the District Court. No trial date set

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Positive News on Tobacco Company Litigation

DOJ Manhattan Supreme Court decision on the diligent enforcement issue Freedom Holdings and denial of appeal of preliminary injunction

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Conclusion: Legal Opinions Important

Bankruptcy remoteness Executory contract and approval of debtors decision to assume MSA Enforceability of MSA and Model Statute

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Tobacco Litigation Update

Presented by: Christophe Razaire Corporate Finance Group

June 23, 2005

Our View

3 threats remain:

Price / Miles DOJ Engle

Star Scientific could be added to list depending on upcoming ruling If these threats are eliminated, litigation risk could reach lowest level in a decade Resolution on 3 cases not likely before early 2006

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3 Threats
Case DOJ Could lead to court-driven volume reductions At worst, not before 2009. No risk of bankrupting bonding because federal court. PRICE / MILES Full judgment bankrupting for PMUSA if under the form of cash payment. At worst, no payment before 2006. Reduced, bearable judgment would have less effect on risk. RJR and B & W in Madison County. Still no bond cap in Illinois. ENGLE Odds of verdict affirmation very low. Bonding protects PMUSA and Lorillard thru US Supreme Court, not RJR and B & W. Could lead to court-driven volume reductions At worst, not before 2009. Bonding could eliminate upstreaming of dividends to obligors. In what way is it a risk for MSA bonds? In what way is it a risk for corporate bonds?

Full judgment bankrupting if under the form of cash payment. At worst, no payment before 2006. Reduced bearable judgment would have less effect on risk. Altria could survive PMUSA bankruptcy.

Odds of verdict affirmation very low. Bonding protects PMUSA and Lorillard thru US Supreme Court, not RJR and B & W.

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Why Litigation Clouds Could Lift

Bond caps State Farm Class Action Fairness Act

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Why Litigation Clouds Could Lift

ASSUMING RESOLUTION OF CRITICAL CASES, OUR REVIEW OF 10K AND 10Q DISCLOSURES SHOWS

In state courts, no largescale case scheduled for trial in a state without a bond cap In federal courts, no largescale case scheduled for trial

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Cases with Some Bonding Risk and/or Risk of High Payments

Case DOJ Company named as defendant Potential bonding requirement Jurisdiction Altria Federal Up to 100% of judgment PMUSA (District of Columbia) RJR Tobacco Co. Lorillard, B & W New Mexico PMUSA RJR Tobacco Co. Lorillard, B & W PMUSA RJR Tobacco Co. Lorillard, B & W PMUSA More than 100% of judgment Comments Disgorgement denied by DC Court of Appeals. Further successful appeal of the issue unlikely. However, bonding remains possible

Romero

Price fixing case. Class has been certified. NM Court of Appeals affirmed certification in February 2005. Defendants seeking review of class certification by NM Supreme Court. "Lights" nationwide class action. Hearing on certification in August 2005. Trial unlikely to start at scheduled date of November 2005.

Schwab

Federal (2nd Circuit)

More than 100% of judgment

Aspinall Massachusetts

Bonding not required, but can be Class certification has been affirmed by Mass. Supreme Court. imposed by court at its discretion (although this is rare)

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Cases with Some Bonding Risk and/or Risk of High Payments

Case Turner Company named as Potential bonding defendant Jurisdiction requirement Comments RJR Tobacco Co. Up to 100% of judgment On hold, awaiting review of Price / Miles by Illinois Illinois Supreme Court. Illinois B&W Up to 100% of judgment On hold, awaiting review of Price / Miles by Illinois Supreme Court.

Howard

Star Scientific

Federal

RJR Tobacco Co. Up to 100% of judgment Patent infringement case. Awaiting ruling on issue of inequitable conduct.

Vending Machine

Federal (Tennessee)

PMUSA

Up to 100% of judgment Claim: Violation of Robinson - Patman Act. Trial scheduled for July 2005. Number of plaintiffs limited to 10. We believe worst-case damages would be low, but we could change our view with further analysis.

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Cases with Risk of High Payments Only, No Bonding Risk

Case Engle Jurisdiction Florida Company Amount of Judgment named as or no verdict yet defendant PMUSA PMUSA = $74 billion RJR Tobacco RJR = $36.3 billion Lorillard B & W Lorillard = $16.3 billion B & W = $17.6 billion PMUSA $10.1 billion If no verdict yet, potential bonding requirement Bonding in place Comments Expecting FL Supreme Court review. Bonding covers PMUSA and Lorillard thru US Supreme Court. Expecting IL Supreme Court review. Bonding covers thru US Supreme Court.

Price / Miles

Illinois

Bonding in place

City of St. Louis

Missouri

Curtis

Minnesota

Altria PMUSA RJR Tobacco Lorillard B & W BAT PMUSA

No verdict yet

$50 million for MSA signatories Healthcare cost recovery and affiliates case brought by hospitals. Trial scheduled to start in January 2006. $150 million "Lights" Claim. Will go to trial unless successful motion for summary judgment or settlement. "Lights" Claim. Will go to trial unless successful motion for summary judgment or settlement.

No verdict yet

Marrone

Ohio

PMUSA

No verdict yet

$50 million

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Cases with Risk of High Payments Only, No Bonding Risk

If no verdict yet, Company potential bonding named as Amount of Judgment or no verdict yet requirement defendant RJR Tobacco, No verdict yet $50 million for MSA RJR Tobacco signatories and affiliates Holdings PMUSA RJR Tobacco Lorillard B&W No verdict yet $25 million (MSA signatories)

Case Collora

Jurisdiction Missouri

Comments "Lights" Claim. Will go to trial unless successful motion for summary judgment or settlement. Price-fixing claim. Class certification not appealable.

Smith

Kansas

British Columbia

PMUSA British Columbia Provincial court Philip Morris Intl RJR Tobacco (federally RJR Tobacco appointed) Holdings

No verdict yet

It appears that no bonding Healthcare cost recovery would be required. case brought by hospitals. Awaiting review of receivability of claim by Canadian Supreme Court.

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Legal Issues

Presented by: Stephen Macy Asset Finance Group

June 23, 2005

Legal Risk Analysis: Two Directions

Traditional bankruptcy remoteness concerns Deal-specific legal issues

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Traditional Bankruptcy Remoteness

Basic concern: securities-issuing entity remains legally unaffected by bankruptcy of other deal participants
Deal sponsor is greatest worry
Often the (ultimate) parent of the issuer

Other affiliates
Sister companies or subsidiaries

Servicer replacement issues

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Legal Theories

Recharacterization of sale as financing Substantive consolidation of issuer with bankrupt affiliate Voidable preference Fraudulent conveyance

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Heightened concern because:

Facts may be closer to problem cases

Especially where assets are not financial assets that convert to cash by their terms

Uniqueness of deals means adverse legal decision does not necessarily affect any sizeable industry
Easier to restrict decision to its facts Judges less leery of upsetting established markets

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Deal-specific Issues

Not a natural kind

Particular legal issues unique to particular asset types

No useful general conclusions

Must look at specific examples

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Example: Life Insurance

Questions re insurable interest

Solicitation by brokers Attitude of state insurance commissioner Credit enhancement for potential problems

State registration requirements State Life Settlement laws

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Example: Tobacco Lawyers Fees

MSA issues discussed already Separability of Fee Agreements from MSA Compliance with professional guidelines Challenges to size of fee awards

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Example: Intellectual Property

Core assets issues Assuring patent, trademark and copyright protection

Federal filings, opinions, etc.

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Example: Aircraft

Foreign jurisdictions
Maintenance of security interests Ability to repossess aircraft under defaulted leases
May need first to foreclose on stock of aircraftowning company, then to begin repossession effort

Titling and tax issues

May require additional structuring

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Intellectual Property

Presented by: Olga Filipenko Asset Finance Group

June 23, 2005

Intellectual Property
What has been securitized to date?

Film Receivables Trademark Licensing Franchise Fees Patent Licensing Royalties Music Royalties

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Film Receivables

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Assets Include

The entire output of a studio The tangible film materials as well as rights to
Release, distribute and exhibit Receive gross receipts from agreements the studio already has with distributors Enter into new distribution agreements

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Different Distribution Windows

provide for different streams of cashflows

Applicable for domestic and international

Theatricals Home Video Pay TV Free TV

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Types of Transactions

Advancing against Ultimates

Films included after domestic release $1B DreamWorks (2002) and $950M Vivendi Universal (2003)

Slate Financing
Future in the can films of a studio $900M Village Roadshow (2003) and $300M Melrose Investors (2004)

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Types of Transactions: Advancing against Ultimates

Advancing against Ultimates of each movie after theatrical release Reduced exposure to the film performance risk

Credit Protection

Over-collateralization depending on advance rate True sale from studio (expenses from reserve account) Amortization triggers tied to accuracy of ultimate projections, asset and expense coverage

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Types of Transactions: Slate Financing

Portfolio of future films of a studio Films production costs and limited portion of studio overhead are financed Exposure to film performance risk

Credit Protection

Subordination of distribution expenses Diversity by the portfolio of films and minimum number of films to be included Triggers tied to asset and debt service coverage as well as financial condition of the studio

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Outlook for Film Receivables

Future transactions
Slate financing with distribution costs on the top of the waterfall Partnership type agreements Include films from multiple studios in one deal

At least three transactions in 2005

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Trademark Licensing

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Assets Include

The trademark Royalties generated from the sale of licensed branded products Could include sales through
3rd Party License Wholesale Retail

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$53M BCBG Max Azria Deal Rated in 2004

Collateral

All current and future trademarks Royalties generated by the licensing of those trademarks to 3rd parties and parent company

Credit Protection

Over-collateralization and reserve Triggers capturing excess cash when royalty streams fall below certain levels IPIFS Guarantee Corp. arranged LOC for the benefit of one class of the notes

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Credit Issues Considered in BCBG Analysis

The history and longevity of the trademark Competition and the trademark positioning Projected cash flows from wholesale and retail sales The current licenses in place including credit quality of the 3rd party licensees, minimum payments, and potential renewals The manager/servicer of the trademark Reliance of the trademark on a single person for artistic direction Potential market for the trademark in distressed situations
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Past Activity: Trademark Licensing

Other apparel trademark transactions rated:

$75M Guess?, rated Baa2 in 2003 $20M Candies, rated Baa3 in 2002 $23M Bill Blass, rated Baa3 in 1999

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Franchise Fees

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What are the Assets?

Intellectual property of the concept Franchise fees paid by franchisee for the right to use name and concept Additional revenues might include upfront amounts paid when new stores are opened If franchisor provides certain specific materials to franchisees, then the profits on these materials might also be included

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Key Points to Consider in Analysis

Strength of the concept Industry overview Reason for securitization Historical data on the performance Role and strength of franchisor/servicer Need for back-up servicer Legal concerns (core assets, true sale, nonconsolidation, fraudulent conveyance)

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Recent Activity

Rated several concepts

Athletes Foot, footwear industry, rated Baa3 in 2003 $290M Arbys transaction, fast food restaurant industry, rated Aaa in 2000

In 2005, downgraded Athletes Foot Asset-Backed Notes to Ba2 following parent companys bankruptcy filing
Closing of company-owned stores True sale not challenged in bankruptcy
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Patent Licensing Royalties

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Only Drug Royalty Patent Transactions Rated To Date

Assets include
Rights to receive royalties and contingent pay rights for a pool of pharmaceutical products

Moodys has historically looked at other patents, factors to consider are

Risk of obsolescence Diverse uses of patents A pool of patents as compared to only one patent

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Drug Royalty Transactions Rated

$225M Royalty Pharma transaction rated Aaa in 2003

MBIA guarantee Upsized twice
to allow for acquisition of additional patents due to better than expected performance

$229M Paul Royalty transaction rated Aaa in 2004

Ambac guarantee

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Points Considered in Rating Paul Royalty Transaction

Performance of the drugs in the pool Diversity in product application and uses of the collateral Credit quality of licensees responsible for paying the royalties Risk of the drug recall by FDA Servicer

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Aircraft

Presented by: Parla Ozgediz Asset Finance Group

June 23, 2005

Three Major Segments of Aircraft ABS

Aircraft Type
Regional Jets

Revenue Stream
Finance Leases

Commercial Jets

Operating Leases

Corporate Jets

Loans

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Regional Jet Lease-Backed Securitizations

RJs: small capacity jets, usually under a 100 seats Cashflow Stream: Finance leases
Series of rental payments over the useful life of the aircraft Lessee is entitled to acquire the title of the aircraft Lessee is responsible for maintenance, taxes and insurance of the aircraft

108

Regional Jet Lease-Backed Securitizations

OLD GENERATION
Type
DC 9-10/30 Avro-RJ 70/85/100 328 Jet/728 Jet/ 428 Jet F28/70/100 Saab 2000

Manufacturer
McDonnell Douglas BaE Systems Fairchild Aerospace Fokker Aircraft Saab

Seats
60-100 85-100 32-70 25/78 50

NEW GENERATION
Type
CRJ100/200/440 CRJ700 CRJ900 ERJ135/140/145 ERJ170/175

Manufacturer
Bombardier Bombardier Bombardier Embraer Embraer

Seats
44-50 70 90 50-70 70
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Regional Jet Lease-Backed Securitizations

Emerging Asset Class with some initial challenges:

Relatively younger and immature market compared to commercial aircraft Not statistically significant data Affiliation of regional airlines with major airlinesgood and bad Highly concentrated in North America Finance lease structure- not a liquid operating lessee base

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Regional Jet Lease-Backed Securitizations

Rating Approach
Three different perspectives: Portfolio, Lessee, Servicer
Portfolio:
Asset Type: mainly 50-70 seat new generation Age Current Market Values and Base Values

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Regional Jet Lease-Backed Securitizations

Rating Approach
Lessee:
Credit Quality- low single B Correlation of default probabilities within the regional operators in the portfolio Geographical/Jurisdictional Concentration

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Regional Jet Lease-Backed Securitizations

Rating Approach
Servicer: Usually the manufacturer itself
Review of servicers total owned and managed portfolio Marketability Reach: Lessee Connections Historical Repossession/Remarketing experience, Strategy on Repossessions Sale Values

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Regional Jet Lease-Backed Securitizations

Quantitative Analysis
Monte Carlo Simulation Simulated Variables:
Lease payments upon default of the lessee Lease Rate Factor: Lease Rate/ Value of the aircraft Default of the lessees, correlations incorporated Aircraft Value curve

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Regional Jet Lease-Backed Securitizations

Historical Issuance
Three private, synthetic transactions
Insurance protection

Outlook
Possibly one or two transactions this year

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Commercial Aircraft Lease-Backed Securitizations

2004 Market Review

No new pooled aircraft securitization More Downgrades

2005 Outlook
Slow pick-up in the securitizations through acquisitions of servicers Repack proposals

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Corporate Aircraft Financing

Corporate Jets:
Loans to high net-worth individuals to finance acquisition of corporate jets

Corporate Jets vs. Commercial Jets

Productivity vs generating revenue Maintenance and useful life

Major Players: Banks and Finance Companies such as GE, AFG, CIT, Textron, GMAC

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Corporate Aircraft Financing

Historical Activity:
Textron Transactions (1997, 2000, 2001) GE Transactions (2003, 2004)

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Corporate Aircraft Financing

Quantitative Analysis
Shift from Static Pool Analysis to Monte Carlo Simulation The variables include:
Depreciated appraised value of the aircraft Obligor defaults and prepayments Economic recessions Repossession costs, repossession timing and finally upon default the sale value of the corporate aircraft
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Corporate Aircraft Financing

Outlook
Currently Quiet, big players may return

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Small Business Loans

Presented by: Michael McDermitt Asset Finance Group

June 23, 2005

Issuance History

Slow Growth in 1990s Consolidation Phase in Early 2000s Return To Growth Mid-2000s Average Deal Sizes Also Larger

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Annual New Issue Volume

$4,000,000,000

$3,500,000,000

$3,000,000,000

$2,500,000,000

$2,000,000,000

$1,500,000,000

$1,000,000,000

$500,000,000

$0
20 05 Y TD 19 96 19 92 19 93 19 94 19 95 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04

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Annual Volume By # Deals & # Issuers

# New Issues
12

# Issuers

# Repeat Issuers

10

0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005YTD

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Credit Performance History

Credit Performance By Downgrade Activity Excellent TMS Business Loan Trust 1997-1 FNBNE (1998)/ FIB (1999 & 2000) Total of $365 Million Across 7 Deals Defaults: FIB Sub/Mezz Classes, < $8MM UPB

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Major Participants Then & Now

1990s
The Money Store

2000s
Lehman Small Business Finance (fmr. div. CNL) GECC Small Business & Middle Market divs. BLX (subsid. Allied Capital) BayView Financial

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Types Of Loans

Unguaranteed Portion of SBA 7(a) Loans

Cannot be mixed in pool with other types

Companion Loans to SBA 7(a) & 504 Conventional Loans

Conventional & Companion loans may be mixed in same pool

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Typical Collateral & Underwriting

1st Lien on Commercial RE Usually Main Collateral

May Be Supported By Liens on Ancillary Real Estate or Equipment

Personal Guarantees Are Common Underwriting DSCR: Business, Real Estate, or Combined Business/ Personal FICO Sometimes Obtained As Supporting Factor

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Wide Variety of Borrowing Terms

Fixed or Floating Interest Rate Fully Amortizing or Balloon Owner Occupied or 3rd Party Tenanted Special Purpose or General Purpose Property

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Issuer Differentiation

Historic: Small Business Oriented

Focus on Owner Occupied Properties Often Special Purpose e.g. Restaurants/ Hotels Personal Guarantees Required

Added: Commercial Real Estate Oriented

3rd Party Tenanted Properties Common, More General Purpose (Office, Apartment, Strip Malls) Personal Guarantees May Not Be Required

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Typical ABS Deal Structure

Pro Rata Structure most common Credit Tranched Aaa to A/Baa $150MM to $750MM Excess Spread Available for Enhancement

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Rating Issues

Product & Property Mix Obligor Diversification

At Issue/ At Tail

Gross Defaults Recoveries Balloon Maturities

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Rating Approach Quantitative Methodology

Choose Model To Fit Issuer/Pool Characteristics

Key Drivers Discrete asset model Cash flow model Multiclass model Default frequency by obligor or obligor group collateral types & recoveries by type Default frequency & recovery rate Expected loss & variability thereof Application Pool Concentrations/ Balloons Limited Historical Default Data Granular Pool Good Historic Default Data Granular Pool Good Historic Default Data Consistent Recovery Rate

Key Pool Metrics Vs. Prior Deals and Other Issuers

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Equipment Leases

Presented by: Kent Becker Asset Finance Group

June 23, 2005

Issuance Down in 2004

Year
2005 YTD 2004 2003 2002 2001

Public (Bil)
$3.6 $5.1 $6.8 $5.3 $6.9

144A Market (Bil)

--$2.1 $3.1 $1.5 $2.5

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Recent Reduction in Issuance Due to:

Exit of smaller leasing companies Acquisitions by larger companies less reliant on securitization

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Public Issuers in 2004

Caterpillar CIT CNH GE John Deere

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Public Issuers in 2005

John Deere-$741 million CAT-$854 million GE-$636 CNH-$1.38 billion

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144 Issuers in 2004

CIT CNH Frontier GE GreatAmerica Marlin

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Equipment Types Unchanged

Ag & Construction equipment Office equipment: computers, copiers, faxes Manufacturing equipment Average balance: $25,000-$250,000 for ag & construction; $5,000-$50,000 for office equipment

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Structures

Pro-rata principal pay deals dominate, but more sequential pay deals coming to market Emergency principal structure shuts off interest to subordinate classes if subs are undercollateralized

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Credit Performance Improves Recently

Stronger liquidity of obligors due to stronger economy Telecom, manufacturers, high tech stronger sectors Tighter controls implemented by servicers in collections and workout functions Improved recoveries on repos due to stronger demand for used equipment Upgrades in ag & construction sector (CNH, Deere, CAT)
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Industry Plagued by Blowups

DVI ICON Prime T&W

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Backup Servicing Important

Backup maps servicing systems Recalculates servicing reports Servicing transfer triggers based on deal performance, financial covenants, or servicers other existing debt facilities

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Outlook

Modest increase in issuance as equipment needs grow due to improving economy 144A market should grow as small leasing companies enter the market Credit performance should remain stable in 2005

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www.moodys.com

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