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Mainsail II Ltd (73WC)


Friday 07 March, 2008

Mainsail II Ltd

Update to Creditors

Mainsail II Ltd
07 March 2008

MAINSAIL II LIMITED                                                7 March 2008

                             Update to Creditors


The Company is an exempted company with limited liability organised under the
law of the Cayman Islands and established for the purpose of carrying out the
business of an investment company in relation to the Company's programme for the
issuance of capital notes (the 'Capital Notes') and mezzanine notes (the
'Mezzanine Notes' (together, with the Capital Notes, the 'Programme Notes') as
more particularly set out in the information memorandum (the 'Information
Memorandum') dated 6 July 2006 in relation to the Programme Notes.

The following update has been provided to secured creditors of Mainsail II

Notification of a Mandatory Acceleration Event was made on 23 August 2007 as a
result of the breach of the Mandatory Acceleration Test. Following the
occurrence of a Mandatory Acceleration Event, the Security Trustee is obliged to
act in accordance with the instructions of the Majority Secured Parties in
relation to enforcement of the Collateral.

An ad hoc committee of holders of CP Obligations (the 'Committee') was formed
following the occurrence of the Mandatory Acceleration Event. The aggregate
amount of Senior Obligations held by members of the Committee exceeds 50% of the
outstanding Senior Obligations. The members of the Committee, acting together,
are therefore able to form an instructing group representing the Majority
Secured Parties for the purposes of giving directions to the Security Trustee in
relation to enforcement and management of the Collateral.

In September 2007, the Security Trustee appointed Houlihan Lokey Howard & Zukin
(Europe) Limited as its financial adviser (the 'Financial Adviser'). Since its
appointment, the Financial Adviser has carried out detailed valuation analysis
in respect of the Issuer's assets in order to assist the Security Trustee in
assessing available options in respect of the forward realisation of the
Issuer's assets. The Issuer's assets primarily consist of a portfolio of
residential mortgage backed securities, including a high concentration of US
sub-prime mortgage backed assets.

The detailed work product prepared by the Financial Adviser has been made
available to holders of Senior Obligations who have subjected themselves to
appropriate confidentiality and trading restrictions. The valuation analysis
carried out by the Financial Adviser has confirmed the trends displayed by
public indices of mortgage-backed securities, including the ABX Index, in
showing significant impairment in the value of the Issuer's asset portfolio
resulting from the on-going liquidity and confidence crisis in financial

Creditors of Mainsail II Limited have been made aware that no valuation of the
Issuer's asset portfolio (whether by the Financial Adviser or derived from
publicly available sources) provides any reasonable expectation that a sale of
the Issuer's assets would generate enough capital to repay the Issuer's
obligations to Senior Secured Parties in full. Accordingly, there is no prospect
of the holders of Mezzanine Notes or Capital Notes receiving any payment in
respect of amounts owing to them.

None of the refinancing proposals presented to the Committee, the Financial
Adviser or the Security Trustee offer any prospect of a return to any holder of
a Mezzanine Note or a Capital Note (or any other Mezzanine Obligation or Junior

Implementation of any refinancing proposal may only occur following formal
enforcement/foreclosure of the Issuer's obligations. The Committee will request
that a receiver is appointed to effect enforcement/foreclosure, and the
directions of Majority Secured Parties will be sought to sanction such an
appointment.  No formal appointment has been made at this time, but following
consideration of various potential candidates by the Committee, certain partners
at KPMG have been selected to act as receiver. An announcement will be made when
the receiver is formally appointed.

The appointment of a receiver will not result in an automatic 'fire sale' of the
Issuer's asset portfolio. The receiver will be tasked with implementing a
refinancing solution which is expected to have the support of the Majority
Secured Parties.

Holders of Programme Notes are aware that the Security Trustee has been directed
by Majority Secured Parties not to make payments from amounts standing to the
credit of the US Operating Account in accordance with the Priority of Payments.
Further directions have been received from Majority Secured Parties that no
payments should be made until the Security Trustee is directed to do so by the
Majority Secured Parties in relation to the making of such payments.

In addition to the Issuer's asset portfolio, the cash currently held amounts to
approximately US$125,000,000.


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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