40XV Paragon 12 A1s

NOTICE OF MEETING - STERLING NOTES

THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF NOTEHOLDERS.  IF ANY NOTEHOLDER IS IN ANY DOUBT AS TO THE ACTION IT SHOULD TAKE OR IS UNSURE OF THE IMPACT OF THE IMPLEMENTATION OF ANY EXTRAORDINARY RESOLUTION TO BE PROPOSED AT A MEETING, IT SHOULD SEEK ITS OWN FINANCIAL AND LEGAL ADVICE, INCLUDING AS TO ANY TAX CONSEQUENCES, IMMEDIATELY FROM ITS STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL OR LEGAL ADVISER.

PARAGON MORTGAGES (NO. 12) PLC

(incorporated in England and Wales with limited liability under registered number 5386924)

(the "Issuer")

NOTICE OF MEETING

of the holders of the outstanding Notes of the Issuer (as described below)

[1] The aggregate principal amount outstanding takes into account any previous amortisation of the Notes.

NOTICE IS HEREBY GIVEN that a meeting (the "Meeting") of the holders of the Notes (the "Noteholders") convened by the Issuer will be held at the offices of Clifford Chance LLP at 10 Upper Bank Street, London, E14 5JJ, United Kingdom for the purpose of considering and, if thought fit, passing the applicable resolutions set out below which will be proposed as an Extraordinary Resolution in accordance with the provisions of the trust deed dated 20 July 2006 and amended on 30 January 2013, 15 May 2019 and 14 February 2022 made between, inter alios, the Issuer and Citicorp Trustee Company Limited (the "Trustee") as trustee for the Noteholders, and constituting the Notes (the "Trust Deed").

The Issuer is also holding meetings of certain other noteholders of the Classes listed in paragraph 8 of the Extraordinary Resolution below. The initial meeting (in respect of the Class A1 Notes) will commence at 10.00 a.m. (London time) on 25 October 2024. Subsequent meetings (including the Meeting) in respect of each other class of notes (in the order set out in the list of Classes in paragraph 8 of the Extraordinary Resolution below) will be held at 5 minute intervals thereafter or after the completion of the preceding meeting (whichever is later).

Unless the context requires otherwise, capitalised terms used but not defined in this Notice have the meanings given to them in the Trust Deed, the terms and conditions of the Notes (the "Conditions") or the Consent Solicitation Memorandum (as defined below).

EXTRAORDINARY RESOLUTION

IN RESPECT OF THE CLASS A2a NOTES DUE 2038

"THAT this meeting of the holders of the outstanding £145,000,000 Class A2a Notes due 2038 (the "Notes"), issued by Paragon Mortgages (No. 12) plc (the "Issuer") and constituted by the trust deed dated 20 July 2006 and amended on 30 January 2013, 15 May 2019 and 14 February 2022 (the "Trust Deed"), made between, inter alios, the Issuer and Citicorp Trustee Company Limited (the "Trustee") as trustee for the holders of the Notes (the "Noteholders"), hereby:

1.            (subject to paragraph 7 of this Extraordinary Resolution) assents to the modification of: (A) the terms and conditions of the Notes (the "Conditions") to provide for the replacement of USD LIBOR with Compounded SOFR as the reference rate for calculating interest in respect of the USD Notes for each Interest Period (as defined in the Conditions) commencing on or after the Effective Date, the inclusion of new fallbacks to address the non-availability of SOFR or the replacement of SOFR (including the corresponding amendment to the definition of "Basic Terms Modification" to refer to such new fallbacks) and certain other related amendments so that the relevant provisions of the Conditions will be in the form set out in the draft Supplemental Trust Deed (as defined below); and (B) the terms of the Swap Transaction (which hedges the currency risk in respect of the USD Notes) to change  the floating rate option specified in the Swap Transaction from USD LIBOR to Compounded SOFR (including corresponding and/or consequential amendments) and the inclusion of new fallbacks to address the non-availability of SOFR or the replacement of SOFR;

2.            (subject to paragraph 7 of this Extraordinary Resolution) authorises, directs, requests and empowers the Issuer and the Trustee to: (a) consent to and execute: (i) a supplemental trust deed (the "Supplemental Trust Deed"); and (ii) the Swap Amended and Restated Confirmation, in each case in the form or substantially in the forms of the drafts produced to this Meeting, with such amendments thereto (if any) as the Trustee requires or agrees to give effect to the changes referred to in paragraph 1 of this Extraordinary Resolution and such other changes as may be necessary in its sole opinion; and (b) execute and do all such other deeds, instruments, acts and things as may be necessary in the Trustee's sole opinion to carry out and to give effect to this Extraordinary Resolution and the implementation of the modifications referred to in this Extraordinary Resolution;

3.            (subject to paragraph 7 of this Extraordinary Resolution) sanctions and assents to every abrogation, modification or compromise of, or arrangement in respect of, the rights of the Noteholders against the Issuer appertaining to the Notes and the Swap Transaction, whether or not such rights arise under the Conditions, the Trust Deed or any other transaction documents, involved in or resulting from or to be effected by, the modifications referred to in paragraphs 1 and 2 of this Extraordinary Resolution and their implementation;

4.            (a) holds harmless, discharges and exonerates the Trustee from, and indemnifies the Trustee against, any and all liability for which it may have become or may become responsible under the Trust Deed or the Notes in respect of any act or omission in connection with the proposal by the Issuer to the Noteholders to approve the modification of the Conditions and the consequential or related amendments to certain transaction documents, in the manner set out in the Notice (the "Proposal"), this Extraordinary Resolution or its implementation and/or the modifications; and (b) irrevocably waives any claim against the Issuer or the Trustee which arises as a result of any loss or damage to the holders of the Notes suffered or incurred as a result of the Issuer or the Trustee following the terms of this Extraordinary Resolution (including for the avoidance of doubt, the directions and/or instructions contained herein), even though it may subsequently be found that there is a defect in this Extraordinary Resolution or that for any reason this Extraordinary Resolution is not valid or binding upon the holders of the Notes;

5.            agrees that the Trustee is not responsible for the accuracy, completeness, validity or correctness of the statements made and documents referred to in this Extraordinary Resolution and the Consent Solicitation Memorandum or any omissions from this Extraordinary Resolution or the Consent Solicitation Memorandum;

6.            confirms that the Trustee is hereby authorised and instructed not to obtain any legal opinions in relation to, or to enquire into the power and capacity of any person to enter into, the Supplemental Trust Deed or the Swap Amended and Restated Confirmation or the due execution and delivery thereof by any party thereto or the validity or enforceability thereof and it will not be liable for any consequences resulting from this instruction;

7.            declares that the implementation of this Extraordinary Resolution is conditional on:

(a)            the Consent Solicitation (as defined below) not having been terminated; and

(b)           the passing of this Extraordinary Resolution and the passing of, and the satisfaction of any conditions referred to in, the corresponding Extraordinary Resolution in respect of each other Class listed in paragraph 8 of this Extraordinary Resolution; and

8.            acknowledges that the following terms, as used in this Extraordinary Resolution, have the following meanings given below:

"Class" means each of the Class A1 Notes, the Class A2a Notes, the Class A2b Notes, the Class A2c Notes, the Class B1a Notes, the Class B1b Notes and the Class C1a Notes and Class C1b Notes;

"Class A1 Notes" means the U.S.$1,500,000,000 Class A1 Notes due 2038 issued by the Issuer which, on 15 May 2019 were (simultaneously with the termination of the currency swap A1 agreement dated 14 July 2006) converted into a GBP Equivalent at a fixed exchange rate of USD to GBP of 1.84, producing GBP Equivalent Initial Principal Amount of £815,217,391.30 and an A1 Note Mandatory Transfer Price and GBP Equivalent Principal Amount Outstanding of £317,409,456.52 in accordance with the A1 Note Conditional Purchase Agreement and which, on 15 May 2019, were redenominated as GBP Class A1 Notes;

"Class A2a Notes" means the £145,000,000 Class A2a Notes due 2038 issued by the Issuer;

"Class A2b Notes" means the €245,000,000 Class A2b Notes due 2038 issued by the Issuer;

"Class A2c Notes" means the U.S.$311,000,000 Class A2c Notes due 2038 issued by the Issuer;

"Class B1a Notes" means the £25,000,000 Class B1a Notes due 2038 issued by the Issuer;

"Class B1b Notes" means the €126,000,000 Class B1b Notes due 2038 issued by the Issuer;

"Class C1a Notes" means the £17,000,000 Class C1a Notes due 2038 issued by the Issuer;

"Class C1b Notes" means the €106,000,000 Class C1b Notes due 2038 issued by the Issuer;

"Consent Solicitation" means the invitation by the Issuer to, among others, the Noteholders to consent to the modification of the Conditions relating to the Notes and other related documents, as described in the Consent Solicitation Memorandum and as the same may be amended in accordance with its terms;

"Consent Solicitation Memorandum" means the consent solicitation memorandum dated 3 October 2024 prepared by the Issuer in relation to the Consent Solicitation;

"Effective Date" means the Interest Payment Date (as defined in the Conditions) falling in November 2024;

"Notice" means the notice given by the Issuer to Noteholders on or around 3 October 2024;

"Sterling Notes" means the Class A1 Notes, the Class A2a Notes, the Class B1a Notes and the Class C1a Notes;

"Swap Transaction" means, in respect of the Class A2c Notes, the currency swap transaction between the Issuer and Barclays Bank PLC with a trade date of 14 July 2006;

"Swap Amended and Restated Confirmation" means the confirmation that will amend and restate the terms of the Swap Transaction to reflect this Extraordinary Resolution and such other changes as may be necessary to implement the modifications referred to in this Extraordinary Resolution; and

"USD Notes" means the Class A2c Notes."

Background

The Issuer has convened the Meeting for the purpose of enabling Noteholders to consider and resolve, if they think fit, to pass the Extraordinary Resolution proposed in relation to the Notes.

On 5 March 2021, the UK Financial Conduct Authority (the "FCA") confirmed that all USD LIBOR settings would either cease to be provided by any administrator or no longer be representative of their underlying market immediately after 30 June 2023 (the "LIBOR Announcement"). In relation to 3-month USD LIBOR in particular (as the interest rate benchmark currently applicable to the USD Notes), the LIBOR Announcement provided that immediately after 30 June 2023, such LIBOR setting would no longer be representative of the underlying market and economic reality and that such representativeness will not be restored. Since 30 June 2023, the FCA has required LIBOR's administrator, ICE Benchmark Administration Limited ("IBA"), to continue publishing the 3-month synthetic USD LIBOR until 30 September 2024 in accordance with the FCA's announcement on 3 April 2023 (the "April 2023 Announcement"). The LIBOR Announcement, the April 2023 Announcement and additional announcements made by the FCA in relation to the cessation of USD LIBOR are available from the website of the FCA at www.fca.org.uk.

In light of the cessation of USD LIBOR, regulators have been urging market participants to take active steps to implement the transition to SOFR published by the Federal Reserve Bank of New York (the "Federal Reserve") and other risk-free rates without undue delay.

On the basis that the final maturity date of the USD Notes falls after 30 September 2024, the Issuer has convened the Meetings for the purpose of enabling the Noteholders to consider and resolve, if they think fit, to approve the Proposal by way of a separate Extraordinary Resolution in relation to each Class, implementing:

(i)           changes in the interest basis specified in the Conditions of the USD Notes from 3-month USD LIBOR to Compounded SOFR by means of a supplemental trust deed;

(ii)          inclusion of new fallbacks to address the non-availability of SOFR or the replacement of SOFR based on the Alternative Reference Rates Committee's recommendations for floating rate bonds; and

(iii)         changes in the floating rate option specified in the Swap Transaction (which, in effect, hedges the USD Notes) from USD LIBOR to Compounded SOFR (including corresponding and/or consequential amendments) and the inclusion of new fallbacks to address the non-availability of SOFR or the replacement of SOFR by means of a swap amended and restated confirmation (the "Swap Amended and Restated Confirmation").

The Proposal constitutes a Basic Terms Modification under the Conditions, and therefore the holders of each Class are invited to approve the Proposal, even though only the interest rate applicable to the USD Notes (and no other Notes) will be amended if the Proposal is implemented. If an Extraordinary Resolution in respect of any Class is not successfully passed or (in the case of the USD Notes) the Eligibility Condition is not satisfied, then the Issuer will not implement the Proposal and neither the USD Notes nor any transaction documents relating to the USD Notes will be amended (irrespective of whether or not the relevant Extraordinary Resolution(s) for any of the other Classes passes).

The proposed revised formula for calculating interest on the USD Notes and payments to be made by Barclays Bank plc as the currency swap provider (the "Swap Provider") to the Principal Paying Agent under the Swap Transaction will be as set out in Annex 1 (Compounded SOFR and Benchmark Replacement). Due to the differences in the nature of USD LIBOR (including synthetic USD LIBOR) and Compounded SOFR, the replacement of USD LIBOR with Compounded SOFR as the reference rate for the USD Notes requires a corresponding credit adjustment spread to be added to the existing Notes Interest Rate Margin payable in respect of the USD Notes and to amounts payable under the Swap Transaction. The Proposal uses the "5-year historical median" methodology agreed by the International Swaps and Derivatives Association for determining this credit adjustment spread and recommended by the Alternative Reference Rates Committee for use in cash products such as the USD Notes. It involves taking the median of the daily difference between USD LIBOR and SOFR in the 5 years leading up to the date of the LIBOR Announcement. Using this methodology, the credit adjustment spread for 3-month USD LIBOR is 0.26161 per cent., as calculated and published by Bloomberg Index Services Limited on the date of the LIBOR Announcement and as referenced on Bloomberg screen YUS0003M Index on the date of the Consent Solicitation Memorandum.

The Trustee has not been involved in the formulation of the Extraordinary Resolution and the Trustee expresses no opinion on the merits of any Extraordinary Resolution or on whether Noteholders would be acting in their best interests in approving the Extraordinary Resolution, and nothing in this Notice should be construed as a recommendation to Noteholders from the Trustee to vote in favour of, against or abstain from voting in respect of, any Extraordinary Resolution.  Noteholders should take their own independent financial, accounting and legal advice on the merits and on the consequences of voting in favour of, against or abstain from voting in respect of, the Extraordinary Resolution, including as to any tax consequences.  The Trustee has not reviewed, nor will it be reviewing, any documents relating to the Consent Solicitation, except those to which it will be a party and this Notice. On the basis of the information set out in this Notice of Meeting (other than Annex 2 (Margin Adjustment) of this Notice which it has not reviewed) and the Consent Solicitation Memorandum, the Trustee has authorised it to be stated that it has no objection to the Extraordinary Resolution being put to Noteholders for their consideration.

Before making a decision with respect to the Proposal, Noteholders should carefully consider, in addition to the other information contained in this Notice, the risk factors set out in Annex 1 (Compounded SOFR and Benchmark Replacement) of this Notice and set out in "Risk Factors and Other Considerations" of the Consent Solicitation Memorandum.

Consent Solicitation

The Issuer has invited holders of the Notes (and the other Classes) (the "Consent Solicitation") to consent to the approval, by Extraordinary Resolution at each relevant Meeting, of the modification of the Conditions of the USD Notes and related transaction documents as described in the Extraordinary Resolution as set out above, all as further described in the Consent Solicitation Memorandum (as defined in the Extraordinary Resolution set out above).

Eligible Noteholders may obtain, from the date of this Notice, a copy of the Consent Solicitation Memorandum from the Consent Website subject to eligibility confirmation and registration.  Alternatively, Noteholders may contact the Information and Tabulation Agent, the contact details for which are set out below.

Agreements, acknowledgements, representations, warranties and undertakings

By submitting an Electronic Voting Instruction to the relevant Clearing System in accordance with the standard procedures of such Clearing System, the holder of the relevant Notes and any Direct Participant submitting such Electronic Voting Instruction on such holder's behalf will be deemed to agree to, acknowledge, represent, warrant and undertake to the Issuer, the Solicitation Agent, the Trustee, the Principal Paying Agent, the Reference Agent, the Registrar and the Information and Tabulation Agent the following: (i) at the time of submission of an Electronic Voting Instruction; (ii) on the Expiration Deadline; and (iii) at the time of the Meeting and the time of any adjourned such Meeting (if the holder of such Notes or the Direct Participant is unable to give these acknowledgements, agreements, representations, warranties and undertakings, such holder or Direct Participant should contact the Information and Tabulation Agent immediately):

1.     Non-reliance:  it has received the Consent Solicitation Memorandum, and has reviewed and accepts the terms, conditions, risk factors and other considerations of the Consent Solicitation, all as described in the Consent Solicitation Memorandum, and has undertaken an appropriate analysis of the implications of the Proposal without reliance on the Issuer, the Administrators, the Solicitation Agent, the Trustee, the Principal Paying Agent, the Reference Agent, the Registrar or the Information and Tabulation Agent (or any of their respective directors, officers, employees, agents or affiliates);

2.     Identity:  by blocking the relevant Notes in the relevant Clearing System, it will be deemed to consent, in the case of a Direct Participant, to have such Clearing System provide details concerning its identity, including account number, to the Information and Tabulation Agent (and for the Information and Tabulation Agent to provide such details to the Issuer, the Administrators and the Solicitation Agent, and their respective legal advisers);

3.     Appointment of proxy: it gives instructions for the appointment, as its proxy, of two or more representatives of the Information and Tabulation Agent by the Registrar to vote in favour of, against or abstain from voting in respect of the relevant Extraordinary Resolution at the Meeting (including any adjourned such Meeting) (as specified in the relevant Electronic Voting Instruction) in respect of all of the Notes within the Class in its account blocked in the relevant Clearing System;

4.     Ratification:  it agrees to ratify and confirm each and every act or thing that may be done or effected by the Issuer, the Trustee or any of their respective directors, officers, employees, agents, representatives or affiliates or any person nominated by the Issuer in the proper exercise of his or her powers and/or authority hereunder;

5.     Further acts:  it agrees to do all such acts and things as are necessary and execute any additional documents deemed by the Issuer or the Trustee to be necessary or desirable, in each case to perfect any of the authorities expressed to be given hereunder;

6.     Compliance with applicable laws:  it has observed the laws of all relevant jurisdictions, obtained all requisite governmental, exchange control or other required consents, complied with all requisite formalities, and paid any issue, transfer or other taxes or requisite payments due from it in each respect in connection with its participation in the Consent Solicitation  in any jurisdiction and it has not taken or omitted to take any action in breach of the terms of the Consent Solicitation or which will or may result in the Issuer, the Administrators, the Solicitation Agent, the Information and Tabulation Agent, the Trustee, the Principal Paying Agent, the Reference Agent, the Registrar or any other person acting in breach of the legal or regulatory requirements of any such jurisdiction in connection with the Consent Solicitation;

7.     Successors and assigns:  all authority conferred or agreed to be conferred pursuant to its acknowledgements, agreements, representations, warranties and undertakings, and all of its obligations are binding upon its successors, assigns, heirs, executors, trustees in bankruptcy and legal representatives, and are not affected by, and will survive, its death or incapacity;

8.     Information or recommendation:  none of the Issuer, the Administrators, the Solicitation Agent, the Information and Tabulation Agent, the Trustee, the Principal Paying Agent, the Reference Agent or the Registrar or any of their respective affiliates, directors, officers, employees, representatives or agents has given it any information with respect to the Consent Solicitation save as expressly set out in the Consent Solicitation Memorandum, nor has any of them made any recommendation to it as to whether it should participate in the Consent Solicitation or vote on the Extraordinary Resolution it has made its own decision with regard to participating in the Consent Solicitation based on any legal, tax, financial or other advice it has deemed necessary to seek;

9.     Tax consequences:  no information has been provided to it by the Issuer, the Administrators, the Solicitation Agent, the Information and Tabulation Agent, the Trustee, the Principal Paying Agent, the Reference Agent or the Registrar or any of their respective directors, officers, agents, affiliates or employees, with regard to the tax consequences for holders of Notes arising from the participation in the Consent Solicitation or the implementation of the Extraordinary Resolution and it acknowledges that it is solely liable for any taxes and similar or related payments imposed on it under the laws of any applicable jurisdiction as a result of its participation in the Consent Solicitation or the implementation of the Extraordinary Resolution and agrees that it will not and does not have any right of recourse (whether by way of reimbursement, indemnity or otherwise) against the Issuer, the Administrators, the Solicitation Agent, the Information and Tabulation Agent, the Trustee, the Principal Paying Agent, the Reference Agent, the Registrar or any of their respective directors, officers, agents, affiliates or employees, or any other person in respect of such taxes and payments;

10.  No unlawful invitation:  it is not a person to whom it is unlawful to make an invitation pursuant to the Consent Solicitation), or for it to participate in the Consent Solicitation, under applicable securities laws, it has not distributed or forwarded the Consent Solicitation Memorandum or any other documents or materials relating to the Consent Solicitation to any such person(s) and it has (before submitting, or arranging for the submission on its behalf, as the case may be, of an Electronic Voting Instruction in respect of its Notes) complied with all laws and regulations applicable to it for the purposes of its participation in the Consent Solicitation;

11.  Sanctions:  it is not a Sanctions Restricted Person;

12.  Power and authority:  it has full power and authority to vote in the Meeting (or any adjourned such Meeting);

13.  Blocking of Notes:  it holds and will hold, until the earlier of: (i) the date on which its Electronic Voting Instruction is validly revoked; (ii) the conclusion of the Meeting (or, if applicable, the adjourned Meeting); and (iii) the termination of the Consent Solicitation, the relevant Notes blocked in the relevant Clearing System and, in accordance with the requirements of, and by the deadline required by, the relevant Clearing System, it has submitted, or has caused to be submitted, an Electronic Voting Instruction to the relevant Clearing System to authorise the blocking of such Notes, with effect on and from the date of such submission so that no transfers of such Notes may be effected until the occurrence of any of the events listed in (i), (ii) or (iii) above;

14.  Notes Outstanding: none of the Notes that are the subject of the Electronic Voting Instruction are held beneficially by or for the account or benefit of the Issuer, PFPLC, PML, MTS, MTL, any Administrator or any of their respective subsidiaries or holding companies or other subsidiaries of such holding companies;

15.  Withdrawal or termination:  in the event of a withdrawal or termination of the Consent Solicitation, the Electronic Voting Instructions with respect to the relevant Notes will be deemed to be withdrawn, and the relevant Notes will be unblocked in the Direct Participant's Clearing System account;

16.  Accuracy of information:  the information given by or on behalf of such Noteholder in the Electronic Voting Instruction is in all respects true, accurate and not misleading and will in all respects be true, accurate and not misleading at the time of the implementation of the Extraordinary Resolution; and

17.  Indemnity:  the Issuer, the Administrators, the Solicitation Agent, the Trustee, the Principal Paying Agent, the Reference Agent, the Registrar and the Information and Tabulation Agent will rely on the truth and accuracy of the foregoing acknowledgements, agreements, representations, warranties and undertakings and such holder will indemnify the Issuer, the Administrators, the Solicitation Agent, the Trustee, the Principal Paying Agent, the Reference Agent, the Registrar and the Information and Tabulation Agent against all and any losses, costs, claims, liabilities, expenses, charges, actions or demands which any of them may incur or which may be made against any of them as a result of any breach of any of the terms of, or any of the agreements, representations, warranties and/or undertakings given in connection with the Consent Solicitation.

The representation set out in paragraph 11 above may not be sought or given at any time after such representation is first made if and to the extent that it is or would be unenforceable at the relevant time (which for the avoidance of doubt, does not include the time of submission of the relevant Electronic Voting Instruction) by reason of breach of: (i) any provision of Council Regulation (EC) No 2271/1996 of 22 November 1996 (as amended) (or any law or regulation implementing such Regulation in any member state of the European Union); or (ii) Council Regulation (EC) No 2271/1996 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.

General

Eligible Noteholders may obtain, from the date of this Notice, a copy of the Consent Solicitation Memorandum from the Consent Website or by contacting the Information and Tabulation Agent, the contact details for which are set out below. A Noteholder will be required to produce evidence satisfactory to the Information and Tabulation Agent that he or she is a person to whom it is lawful to send the Consent Solicitation Memorandum and to make an invitation to participate in the Consent Solicitation under applicable laws before being sent a copy of the Consent Solicitation Memorandum. 

Copies of: (i) the Trust Deed; (ii) this Notice of Meeting; and (iii) the current drafts of the Supplemental Trust Deed and the Swap Amended and Restated Confirmation as referred to in the Extraordinary Resolution, are also available from the Consent Website or for collection by Noteholders on and from the date of this Notice of Meeting up to and including the date of the Meeting from the Information and Tabulation Agent, the contact details for which are set out below, during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) up to and including the date of the Meeting. Any revised versions of the drafts of the Supplemental Trust Deed and the Swap Amended and Restated Confirmation made available as described above and marked to indicate changes to the draft made available on the date of this Notice of Meeting will supersede the previous drafts of the Supplemental Trust Deed and the Swap Amended and Restated Confirmation, and Noteholders will be deemed to have notice of any such changes.

The attention of Noteholders is particularly drawn to the procedures for voting, quorum and other requirements for the passing of the Extraordinary Resolution at the Meeting or any meeting held following any adjournment of the Meeting, which are set out in the second paragraph of "Voting and Quorum" below.  Having regard to such requirements, Noteholders are strongly urged either to attend the Meeting or to take steps to be represented at the Meeting (including by way of submitting Electronic Voting Instructions in favour of the Proposal (all such terms as defined in the Consent Solicitation Memorandum)) as soon as possible.

Voting and Quorum

Noteholders who have submitted and not revoked a valid Electronic Voting Instruction in respect of the Extraordinary Resolution, by which they will have given instructions for the appointment of two or more representatives of the Information and Tabulation Agent by the Registrar as their proxy to attend and vote (as specified in the relevant Electronic Vote Instruction) in respect of the Extraordinary Resolution at the Meeting and any meeting held following any adjournment of the Meeting, need take no further action to be represented at the Meeting or any such adjourned meeting. Further details on how to submit an Electronic Voting Instruction are set out below.

Noteholders who have not submitted or have submitted and subsequently revoked an Electronic Voting Instruction in respect of the Extraordinary Resolution should take note of the relevant provisions set out below detailing how such Noteholders can attend or take steps to be represented at the Meeting (references to which, for the purpose of such provisions, include, unless the context otherwise requires, any meeting held following any adjournment of the Meeting).

1.            Subject as set out below, the provisions governing the convening and holding of a meeting of the Noteholders are set out in Schedule 3 to the Trust Deed, a copy of which is available for inspection by the Noteholders as referred to above.

Each person (a beneficial owner) who is the owner of a particular aggregate Principal Amount Outstanding of the Notes through Euroclear, Clearstream, or a person who is shown in the records of Euroclear or Clearstream as a holder of the Notes (a "Direct Participant"), should note that a beneficial owner will only be entitled to attend and vote at the Meeting in accordance with the procedures set out below and where a beneficial owner is not a Direct Participant it will need to make the necessary arrangements, either directly or with the intermediary through which it holds its Notes, for the Direct Participant to complete these procedures on its behalf.

A Noteholder who wishes to attend and vote at the Meeting and any adjourned such Meeting in person must have obtained a valid Voting Certificate issued by the Registrar.

A Noteholder may obtain a Voting Certificate in respect of its Notes permitting such Noteholder to attend the Meeting by arranging for its Notes to be blocked in an account with Euroclear or Clearstream (unless the Note is the subject of a block voting instruction which has been issued and is outstanding in respect of the Meeting or any adjourned such Meeting) not less than 48 hours before the time fixed for the Meeting (or, if applicable, any adjourned such Meeting) and within the relevant time limit specified by Euroclear or Clearstream, as the case may be, upon terms that the Notes will not cease to be so blocked until the first to occur of the conclusion of the Meeting or any adjourned such Meeting and the surrender of the Voting Certificate to the Information and Tabulation Agent and notification by the Information and Tabulation Agent to Euroclear or Clearstream, as the case may be, of such surrender or the compliance in such other manner with the rules of Euroclear or Clearstream, as the case may be.

A Noteholder not wishing to attend and vote at the Meeting may either deliver the Voting Certificate to the person whom it wishes to attend on its behalf or give a voting instruction (in the form of an electronic voting instruction (an "Electronic Voting Instruction") in accordance with the standard procedures of Euroclear or Clearstream) to, and require the Principal Paying Agent to, include the votes attributable to its Notes in a block voting instruction issued by the Registrar for the Meeting or any adjourned such Meeting, in which case the Registrar will appoint a proxy to attend and vote at such Meeting in accordance with such Noteholder's instructions.

If a Noteholder wishes the votes attributable to its Notes to be included in a block voting instruction for the Meeting or any adjourned such Meeting, then: (i) the Noteholder must arrange for its Notes to be blocked in an account with Euroclear or Clearstream for that purpose; and (ii) the Noteholder or a duly authorised person on its behalf must direct the Principal Paying Agent as to how those votes are to be cast by way of an Electronic Voting Instruction, not less than 48 hours before the time fixed for the Meeting (or, if applicable, any adjourned such Meeting) and within the time limit specified by Euroclear or Clearstream, as the case may be, upon terms that the Notes will not cease to be so blocked until the first to occur of: (i) the conclusion of the Meeting or any adjourned such Meeting; and (ii) not less than 24 hours before the time for which the Meeting is convened, the notification in writing of any revocation of a Noteholder's previous instructions to the Principal Paying Agent and the same then being notified in writing by the Registrar to the Issuer and the Trustee and such Notes ceasing in accordance with the procedures of Euroclear or Clearstream, as the case may be, and with the agreement of the Principal Paying Agent to be held to its order or under its control.

Electronic Voting Instructions must be submitted in respect of an original principal amount of Notes of not less than U.S.$100,000 and integral multiples of U.S.$1,000 thereafter in respect of the USD Notes (ISIN: XS0261647027), £50,000 and integral multiples of £1,000 thereafter in respect of the Sterling Notes, or €50,000 and integral multiples of €1,000 thereafter in respect of the EUR Notes. For the above purposes, instructions given by Direct Participants to the Information and Tabulation Agent through Euroclear or Clearstream will be deemed to be instructions given to the Principal Paying Agent.

2.            As the proposed amendment is a Basic Terms Modification (as defined in the Trust Deed), the quorum required for the Extraordinary Resolution to be considered at the Meeting is two or more persons present and holding or representing greater than 75 per cent. of the aggregate GBP Equivalent Initial Principal Amount of the Notes for the time being outstanding.

In the event such quorum is not present within 15 minutes from the time initially fixed for a Meeting, such Meeting will be adjourned until such date, not less than 14 nor more than 42 days later.  At any such adjourned Meeting two or more persons present and holding or representing greater than 25 per cent. of the aggregate GBP Equivalent Initial Principal Amount of the Notes then outstanding will form a quorum.

Voting Certificates obtained and Electronic Voting Instructions given in respect of any Meeting (unless revoked in accordance with the terms of the Trust Deed and, in the case of Electronic Voting Instructions, in accordance with the procedures of the Euroclear or Clearstream, as the case may be) will remain valid for any such adjourned Meeting.

Noteholders should note these quorum requirements and should be aware that, if the Noteholders either present or appropriately represented at the Meeting are insufficient to form a quorum for the Extraordinary Resolution, the Extraordinary Resolution cannot be formally considered at such Meeting. Noteholders are therefore encouraged either to attend the Meeting or to arrange to be represented at the Meeting as soon as possible.

3.            Every question submitted to a Meeting will be decided in the first instance by a show of hands and in case of equality of votes the chairman of the Meeting will, both on a show of hands and on a poll, have a casting vote in addition to the vote or votes (if any) to which he may be entitled as a holder of a Voting Certificate or as a proxy or as a representative.

Unless a poll is (before, or on the declaration of the result of, the show of hands) demanded by the chairman of the Meeting, the chairman of the Meeting or the Issuer or by two or more persons present holding or representing not less than 2 per cent. of the aggregate GBP Equivalent Initial Principal Amount of the Notes then outstanding, a declaration by the chairman of the Meeting that a resolution has been carried or carried by a particular majority or lost or not carried by a particular majority will be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against (or abstentions from voting in respect of) such resolution.

On a show of hands every person who is present and is a holder of Notes or is a proxy or representative will have one vote.  On a poll every such person will have one vote in respect of each £1 in principal amount of the GBP Equivalent Initial Principal Amount of the Notes then outstanding so produced or represented by the Voting Certificate so produced or in respect of which he is a proxy.

4.            To be passed at the Meeting, the Extraordinary Resolution requires a majority consisting of not less than 75 per cent. of the persons voting thereat upon a show of hands or if a poll be duly demanded then by a majority consisting of not less than 75 per cent. of the GBP Equivalent Initial Principal Amount of the Notes voting in such poll.  If passed, the Extraordinary Resolution will be binding on all Noteholders, whether or not present at the Meeting at which it is passed and whether or not voting.

This Notice is given by Paragon Mortgages (No. 12) plc.

Noteholders should contact the following for further information:

The Solicitation Agent

Lloyds Bank Corporate Markets plc

10 Gresham Street

London EC2V 7AE

Telephone:            +44 20 7158 1719/1726

Attention:              Liability Management Team

Email:                    lbcmliabilitymanagement@lloydsbanking.com  

The Information and Tabulation Agent

Sodali & Co

Leadenhall Building

122 Leadenhall St

City of London, EC3V 4AB

United Kingdom

Telephone:            +44 20 4513 6933 (U.K.) / +1 203 658 9457 (U.S.)

Email:                    paragon@investor.sodali.com

Consent Website: https://projects.sodali.com/paragon

Dated: 3 October 2024

ANNEX 1 TO THE NOTICE OF MEETING

COMPOUNDED SOFR AND BENCHMARK REPLACEMENT

Compounded SOFR

"Benchmark" means Compounded SOFR, which is a compounded average of daily SOFR, as determined for each Interest Period in accordance with the specific formula and provisions set out below.

If the Issuer or Reference Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred in respect of Compounded SOFR (or the daily SOFR used in the calculation hereof) prior to the relevant SOFR Determination Time, then the provisions under the heading "Benchmark Replacement" below will apply.

"Compounded SOFR" with respect to any Interest Period, means the rate of return of a daily compound interest investment computed in accordance with the following formula (and the resulting percentage will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005 per cent. being rounded upwards to the nearest 0.00001 per cent.):

where:

"d" is the number of calendar days in the relevant Interest Period;

"D" is 360;

"d_o" is the number of U.S. Government Securities Business Days in the relevant Interest Period;

"i" is a series of whole numbers from one to d_o, each representing the relevant U.S. Government Securities Business Day in chronological order from, and including, the first U.S. Government Securities Business Day to and including the last U.S. Government Securities Business Day in the relevant Interest Period;

"n_i" for any U.S. Government Securities Business Day "i" in the relevant Interest Period, is the number of calendar days from, and including, such U.S. Government Securities Business Day "i" to, but excluding, the following U.S. Government Securities Business Day ("i+1");

"SOFR_i" means the SOFR for the U.S. Government Securities Business Day falling five U.S. Government Securities Business Days prior to the relevant U.S. Government Securities Business Day "i";

"Interest Determination Date" means, in respect of any Interest Period, the date falling five U.S. Government Securities Business Days prior to the Interest Payment Date for such Interest Period (or the date falling five U.S. Government Securities Business Days prior to such earlier date, if any, on which the USD Notes are due and payable);

"SOFR" with respect to any U.S. Government Securities Business Day, means:

(i)           the Secured Overnight Financing Rate published for such U.S. Government Securities Business Day as such rate appears on the SOFR Administrator's Website at 3:00 p.m. (New York time) on the immediately following U.S. Government Securities Business Day (the "SOFR Determination Time"); or

(ii)          subject to adjustment in accordance with the provision under the heading "Benchmark Replacement" below, if the rate specified in (i) above does not so appear, the Secured Overnight Financing Rate as published in respect of the first preceding U.S. Government Securities Business Day for which the Secured Overnight Financing Rate was published on the SOFR Administrator's Website;

"SOFR Administrator" means the Federal Reserve Bank of New York (or a successor administrator of the Secured Overnight Financing Rate);

"SOFR Administrator's Website" means the website of the Federal Reserve Bank of New York, or any successor source; and

"U.S. Government Securities Business Day" means any day except for a Saturday, a Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

Benchmark Replacement

If the Issuer or the Reference Agent determines on or prior to the relevant Reference Time that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the then-current Benchmark, the Benchmark Replacement will replace the then-current Benchmark for all purposes relating to the USD Notes in respect of all determinations on such date and for all determinations on all subsequent dates.  In connection with the implementation of a Benchmark Replacement, the Issuer will have the right to make Benchmark Replacement Conforming Changes from time to time, without any requirement for the consent or approval of the Trustee or Noteholders and the Trustee may, at the direction and expense of the Issuer, and having received a certificate from the Issuer, signed by two Directors of the Issuer (upon which the Trustee shall be entitled rely absolutely without enquiry or liability), (i) confirming (x) that a Benchmark Transition Event has occurred, (y) the relevant Benchmark Replacement and, (z) where applicable, any Benchmark Replacement Adjustment and/or the specific terms of any relevant Benchmark Replacement Conforming Changes, in each case as determined in accordance with the benchmark replacement provisions set out herein; and (ii) certifying that the relevant Benchmark Replacement Conforming Changes are necessary to ensure the proper operation of such Benchmark Replacement and/or Benchmark Replacement Adjustment, concur with the Issuer to effect such amendments to the Conditions together with such consequential amendments to the Trust Deed and/or the Agency Agreement as Issuer may deem appropriate in order to give effect to Condition 19 and the Trustee shall not be liable to any person for any consequences thereof. No consent of Noteholders shall be required in connection with effecting such changes, including for the execution of any documents or the taking of other steps by the Trustee, the Issuer or any of the parties to the Agency Agreement (if required). The Trustee shall not be obliged to agree to any amendments which in the sole opinion of the Trustee would have the effect of (A) exposing the Trustee to any liabilities against which it has not been indemnified and/or secured and/or pre-funded to its satisfaction or (B) increasing the obligations or duties or decreasing the rights or protection, of the Trustee in the documents to which it is a party and/or the Conditions. The Agents shall give effect to Condition 19 (by effecting such consequential amendments to the Agency Agreement or otherwise as is necessary on the part of each Agent, provided that the Agents shall not be obliged to give effect to any such amendments if, in the opinion of the Agent, the same would not be operable in accordance with the terms proposed pursuant to Condition 19 or would expose it to any additional duties or liabilities or reduce or amend the rights and/or protective provisions afforded to it in the Conditions and/or the Agency Agreement). The Issuer shall promptly following the determination of any changes pursuant to Condition 19 give notice thereof to the Trustee, the Agents and the Noteholders in accordance with Condition 12. 

Subject to the foregoing, any determination, decision or election that may be made by the Issuer pursuant to this section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection:

(i)           will be conclusive and binding absent manifest error;

(ii)          will be made in the sole discretion of the Issuer; and

(iii)         notwithstanding anything to the contrary in the documentation relating to the USD Notes, shall become effective without consent from the holders of the USD Notes or any other party.

"Benchmark" means, initially, Compounded SOFR, as such term is defined above; provided that if the Issuer determines on or prior to the Reference Time that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Compounded SOFR (or the published daily SOFR used in the calculation thereof) or the then-current Benchmark, then "Benchmark" shall mean the applicable Benchmark Replacement;

"Benchmark Replacement" means the first alternative set forth in the order below that can be determined by the Issuer or the Reference Agent as of the Benchmark Replacement Date:

(i)           the sum of: (A) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark and (B) the Benchmark Replacement Adjustment;

(ii)          the sum of: (A) the ISDA Fallback Rate and (B) the Benchmark Replacement Adjustment; or

(iii)         the sum of: (A) the alternate rate of interest that has been selected by the Issuer as the replacement for the then-current Benchmark giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time and (B) the Benchmark Replacement Adjustment;

"Benchmark Replacement Adjustment" means the first alternative set forth in the order below that can be determined by the Issuer as of the Benchmark Replacement Date:

(i)           the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;

(ii)          if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, the ISDA Fallback Adjustment; or

(iii)         the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Issuer giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated floating rate notes at such time;

"Benchmark Replacement Conforming Changes" means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the timing and frequency of determining rates and making payments of interest, rounding of amounts or tenors, and other administrative matters) that the Issuer decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Issuer decides that adoption of any portion of such market practice is not administratively feasible or if the Issuer determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Issuer determines is reasonably necessary);

"Benchmark Replacement Date" means the earliest to occur of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

(i)           in the case of clause (i) or (ii) of the definition of "Benchmark Transition Event", the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark (or such component); or

(ii)          in the case of clause (iii) of the definition of "Benchmark Transition Event", the date of the public statement or publication of information referenced therein;

For the avoidance of doubt, if the event that gives rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination;

"Benchmark Transition Event" means the occurrence of one or more of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

(i)           a public statement or publication of information by or on behalf of the administrator of the Benchmark (or such component) announcing that such administrator has ceased or will cease to provide the Benchmark (or such component), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

(ii)          a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark (or such component), the central bank for the currency of the Benchmark (or such component), an insolvency official with jurisdiction over the administrator for the Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark (or such component) has ceased or will cease to provide the Benchmark (or such component) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

(iii)         a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative;

"ISDA Fallback Adjustment" means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the 2006 ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark;

"ISDA Fallback Rate" means the rate that would apply for derivatives transactions referencing the 2006 ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment;

"Reference Time" with respect to any determination of the Benchmark means (i) if the Benchmark is Compounded SOFR, the SOFR Determination Time, and (ii) if the Benchmark is not Compounded SOFR, the time determined by the Issuer or the Reference Agent after giving effect to the Benchmark Replacement Conforming Changes;

"Relevant Governmental Body" means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto; and

"Unadjusted Benchmark Replacement" means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

Any Benchmark Replacement, Benchmark Replacement Adjustment and the specific terms of any Benchmark Replacement Conforming Changes, determined above will be notified promptly by the Issuer to the Trustee, the Agents and, in accordance with the Conditions, the Noteholders.  Such notice shall be irrevocable and shall specify the effective date on which such changes take effect.

If the Rate of Interest for the USD Notes cannot be determined in accordance with the foregoing provisions, the Rate of Interest for the USD Notes shall be that determined as at the last preceding Interest Determination Date (though substituting, where a different Notes Interest Rate Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Notes Interest Rate Margin relating to the relevant Interest Period, in place of the Notes Interest Rate Margin relating to that last preceding Interest Period).

RISK FACTORS AND OTHER CONSIDERATIONS

Before making a decision with respect to the Extraordinary Resolution, Noteholders should carefully consider, in addition to the other information contained in this Notice of Meeting, the following and the other risk factors set out in the "Risk Factors and Other Considerations" section of the Consent Solicitation Memorandum:

The market continues to develop in relation to SOFR as a reference rate.

SOFR differs from USD LIBOR (including synthetic USD LIBOR) in a number of material respects, including (without limitation) that SOFR is a backwards-looking, secured, compounded, risk-free overnight rate, whereas USD LIBOR (including synthetic USD LIBOR) is expressed on the basis of a forward-looking term, is unsecured and includes a risk-element based on inter-bank lending. As such, investors should be aware that USD LIBOR (including synthetic USD LIBOR) and SOFR may behave materially differently as interest reference rates for the Notes and the Swap Transaction. Furthermore, SOFR is a secured rate that represents overnight secured funding transactions, and therefore will perform differently over time to an unsecured rate such as USD LIBOR (including synthetic USD LIBOR).  For example, since publication of SOFR began, daily changes in SOFR have, on occasion, been more volatile than daily changes in comparable benchmarks or other market rates.

Publication of SOFR began in April 2018 and the rate therefore has a limited history. The future performance of SOFR may therefore be difficult to predict based on limited historical performance. The level of SOFR during the term of the USD Notes may bear little or no relation to the historical level of SOFR. Prior observed patterns, if any, in the behaviour of market variables and their relation to SOFR such as correlations, may change in the future.

If the Proposal is implemented, interest amounts on the USD Notes and U.S. dollar amounts payable in respect of the USD Notes to the Issuer under the Swap Transaction will only be capable of being determined towards the end of the relevant Interest Period and shortly prior to the relevant interest payment date. It may be difficult for investors in the USD Notes to reliably estimate the amount of interest which will be payable on such USD Notes or on the cross-currency swap.

In addition, it should be noted that broadly divergent interest rate calculation methodologies may develop and apply as between the mortgage loans, the Notes and/or the swap agreements due to different market conventions, variations in applicable fall-back provisions or other matters and the effects of this are uncertain but could include a reduction in the amounts available to the Issuer to meet its payment obligations in respect of the Notes. Further, changes to SOFR may adversely affect the operation of the Swap Amended and Restated Confirmation.

The administrator of SOFR may make changes that could change the value of SOFR or discontinue SOFR.

The Issuer and the Class A2c cross-currency swap provider has no control over the determination, calculation or publication of SOFR. There can be no guarantee that such rates will not be discontinued, suspended or fundamentally altered in a manner that is materially adverse to the interests of investors in Notes which reference a SOFR rate. In particular, the Federal Reserve Bank of New York, as administrator of SOFR may make methodological or other changes that could change the value of SOFR, including changes related to the method by which SOFR is calculated, eligibility criteria applicable to the transactions used to calculate SOFR, or timing related to the publication of SOFR. In addition, the administrator of SOFR may alter, discontinue or suspend calculation or dissemination of SOFR (in which case a fallback method of determining the interest rate on the USD Notes will apply). The administrator of SOFR has no obligation to consider the interests of investors in the Notes when calculating, adjusting, converting, revising or discontinuing SOFR.

No assurance that the Proposal will take effect and the impact of the Proposal not being implemented.

Until each Extraordinary Resolution in relation to each Class of Notes is passed by the holders of such Class of Notes and (in the case of the USD Notes) the Eligibility Condition has been satisfied, no assurance can be given that the Proposal will take effect. In particular, subject to applicable law, the Issuer may extend, re-open, amend or terminate the Consent Solicitation at any time before the Expiration Deadline (or, where there is an adjourned Meeting, 48 hours before the time set for any such adjourned Meeting), as described in the "Amendment and Termination" section of the Consent Solicitation Memorandum.

If the Proposal is not implemented, the Rate of Interest in respect of the USD Notes will effectively be fixed at the Rate of Interest for the last Interest Period for which 3-month synthetic USD LIBOR was published and, pursuant to the Swap Transaction, the Swap Provider will calculate payments to be made to the Issuer on each Interest Payment Date after 30 September 2024 based on the fallback rate in the definition of "USD-LIBOR-BBA" in the Annex to the 2000 ISDA Definitions, being "USD-LIBOR-Reference Banks" as defined in the Annex to the 2000 ISDA Definitions and determined using quotes from reference banks in the New York banking market (if available).

However, there is considerable uncertainty as to how the fallback rate for the Swap Transaction would be determined if quotes from reference banks in the New York banking market cannot be obtained, which could lead to the Issuer being unhedged with respect to the currency risk in relation to the USD Notes. Whether or not a fallback rate for the Swap Transaction can be obtained, there is therefore likely to be a mismatch between the amounts payable by the swap counterparty which is paid to the Issuer and the amounts which will be calculated as payable by the Issuer in respect of those Notes. It is unclear how this mismatch would be funded and this may lead to an interest shortfall whereby the Issuer has insufficient funds to pay interest payments on the USD Notes on an Interest Payment Date and an Event of Default could occur under the USD Notes.  This will affect both the holders of the USD Notes and the Notes denominated in Euro and Sterling with uncertain implications for the Issuer's ability to pay amounts due under the Notes.

ANNEX 2 TO THE NOTICE OF MEETING - MARGIN ADJUSTMENT

Rationale for the Noteholder Proposal and Margin Adjustment

The proposed revised formula for calculating interest on the USD Notes and payments to be made by Barclays Bank plc as the currency swap provider to the Principal Paying Agent under the Swap Transaction will be as set out in Annex 1 (Compounded SOFR and Benchmark Replacement) to the Notice of Meeting. Due to the differences in the nature of USD LIBOR (including synthetic USD LIBOR) and Compounded SOFR, the replacement of USD LIBOR with Compounded SOFR as the reference rate for the USD Notes requires a corresponding credit adjustment spread to be added to the existing Notes Interest Rate Margin payable in respect of the USD Notes and to amounts payable under the Swap Transaction. The Proposal uses the "5-year historical median" methodology agreed by the International Swaps and Derivatives Association for determining this credit adjustment spread and recommended by the Alternative Reference Rates Committee for use in cash products such as the USD Notes. It involves taking the median of the daily difference between USD LIBOR and SOFR in the 5 years leading up to the date of the LIBOR Announcement. Using this methodology, the credit adjustment spread for 3-month USD LIBOR is 0.26161 per cent., as calculated and published by Bloomberg Index Services Limited on the date of the LIBOR Announcement and as referenced on Bloomberg screen YUS0003M Index on the date of this Consent Solicitation Memorandum.

If the Proposal is implemented, the Rate of Interest in respect of the USD Notes for each Interest Period commencing on or after the Effective Date (being the Interest Payment Date for the USD Notes falling in November 2024) will be determined by the Reference Agent by reference to Compounded SOFR. The first Interest Payment Date on which the amounts of interest payable on the USD Notes will be determined by the Reference Agent by reference to Compounded SOFR rather than 3-month synthetic USD LIBOR will be the Interest Payment Date falling in February 2025 in respect of the Interest Period from (and including) the Interest Payment Date falling in November 2024 up to (but excluding) the Interest Payment Date falling in February 2025. 

If the Proposal is implemented, the U.S. dollar amounts payable in respect of the USD Notes and to  the Issuer under the Swap Transaction via the Principal Paying Agent in respect of the USD Notes on or after the Effective Date will be determined by reference to Compounded SOFR.

If the Proposal is not implemented, the Rate of Interest in respect of the USD Notes will effectively be fixed at the Rate of Interest for the last Interest Period for which 3-month synthetic USD LIBOR was published and, pursuant to the Swap Transaction, the Swap Provider will calculate payments to be made to the Issuer on each Interest Payment Date after 30 September 2024 based on the fallback rate in the definition of "USD-LIBOR-BBA" in the Annex to the 2000 ISDA Definitions, being "USD-LIBOR-Reference Banks" as defined in the Annex to the 2000 ISDA Definitions and determined using quotes from reference banks in the New York banking market (if available).

However, there is considerable uncertainty as to how the fallback rate for the Swap Transaction would be determined if quotes from reference banks in the New York banking market cannot be obtained, which could lead to the Issuer being unhedged with respect to the currency risk in relation to the USD Notes. Whether or not a fallback rate for the Swap Transaction can be obtained, there is therefore likely to be a mismatch between the amounts payable by the swap counterparty which is paid to the Issuer and the amounts which will be calculated as payable by the Issuer in respect of those Notes. It is unclear how this mismatch would be funded and this may lead to an interest shortfall whereby the Issuer has insufficient funds to pay interest payments on the USD Notes on an Interest Payment Date and an Event of Default could occur under the USD Notes.  This will affect both the holders of the USD Notes and the Notes denominated in Euro and Sterling with uncertain implications for the Issuer's ability to pay amounts due under the Notes.

For the avoidance of doubt, irrespective of whether or not the Proposal is implemented, the Rate of Interest to be paid in respect of the USD Notes on the Interest Payment Date falling on the Effective Date will continue to be determined by reference to 3 month synthetic USD LIBOR, calculated on the preceding Interest Determination Date by the Reference Agent.

The Margin Adjustment

In respect of the USD Notes, the Rate of Interest that will be effective from the Effective Date will be equal to Compounded SOFR plus the New Margin.

"New Margin" means:

A.            the Current Margin; plus

B.            the Margin Adjustment,

where:

"Current Margin" means 0.22 per cent.; and

"Margin Adjustment" means 0.26161 per cent.

The detailed provisions relating to the calculation of Compounded SOFR are set out in the Supplemental Trust Deed.