Risks

• Capital invested in the Units is at risk: There is no capital protection or guarantee of financial return in respect of your investment in the Units. The value of the Units is calculated by reference to any Credit Events with respect to the Reference Entity during the Investment Term. You may lose some or all of your Investment Amount as a result of the Reference Entity experiencing a Credit Event.
• Credit exposures to Reference Entity: The Units will reference the credit of the Reference Entity, therefore the Units include a risk of capital loss in part or in whole, as the result of Credit Event(s) occurring with respect to the Reference Entity. The Final Value and/or the Coupons of the Units will depend on whether a Credit Event has occurred in respect of such Reference Entity. If between the First Credit Event Occurrence Date and the Last Credit Event Occurrence Date, a Credit Event occurs with respect to the Reference Entity, the Units may be adversely affected by an actual loss of principal and loss of future Coupons (including any accrued but unpaid Coupons). Consequently, the Units may create significantly leveraged exposure to the credit of such Reference Entity. If a Credit Event occurs then third parties, such as the relevant CDDC, will have broad discretionary authority to make various determinations and adjustments with respect to the Reference Asset and there may be a conflict of interest between such parties and Investors in Units.
• Credit Exposure to Issuer and Hedge Counterparty: In addition to the above, Investors also bear credit risk with respect to the Issuer and, indirectly, to the Hedge Counterparty. The performance of the Units is dependent not only on whether a Credit Event occurs with respect to the Reference Entity, but also on the creditworthiness of the Issuer, which in turn depends on the creditworthiness of the Hedge Counterparty. The Issuer’s ability to fulfil its obligations under the Units depends on the Hedge Counterparty fulfilling its obligations under the Hedge Agreement which may be affected by certain factors, including but not limited to liquidity risks, market risks, credit risks, cross-border and foreign exchange risks, operational risks, legal and regulatory risks and competition risks. Please refer to section 2 “Risks” and Section 3 “Security Arrangements” of the Master PDS for more information regarding a default by the Hedge Counterparty.
• Credit Rating: Investors should be aware that credit ratings do not constitute a guarantee of the quality of the Units or the Reference Entity. The rating assigned to the Reference Asset by the rating agencies, if any, is based on the Reference Entity’s current financial condition (or, as the case may be, the Reference Entity’s long term unsubordinated debt rating) and reflects only the rating agencies’ opinions. In respect of the Reference Entity, rating agencies do not evaluate the risks of fluctuation in market value but attempt to assess the likelihood of principal and/or interest payments being made. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning agency. Nevertheless, the rating agencies may fail to make timely changes in credit ratings in response to subsequent events so that a Reference Entity’s current financial condition may be better or worse than a rating indicates. Accordingly, a credit rating may not fully reflect the true risks under the Units.
• Secondary Offer Period: Investors who purchase Units in the Secondary Offer Period at an Issue Price greater than the Face Value of $100.00 will receive a lower overall return, as the Final Value and Coupons are calculated with respect to the Face Value of $100.00 per Unit. Additionally, if there is a Credit Event, an Investor who purchased Units at an Issue Price greater than $100.00 will incur a greater loss as the recovery of funds in a Credit Event would be based on the Face Value of $100.00 per Unit.
• Performance of the Reference Entity: Historical performance of the Reference Entity should not be taken as an indication of the future performance of the Reference Entity during the Investment Term. It is impossible to determine with certainty whether the Reference Entity will suffer a Credit Event. Investors should consider all appropriate publicly available information in relation to the Reference Entity. These factors include, but are not limited to, movements in international financial markets, interest rates, currency rates and global economic, political, technological and environmental factors. In particular, as the Final Value (and payment of Coupons) depends on whether a Credit Event has occurred throughout the Investment Term, the Final Value may be less than an Investor’s Issue Price if a Credit Event has occurred and may be zero. The Units are a speculative investment and may produce less returns than other investments, or no return at all. Investors should not expect the return on their investment to be the same as a return on an equivalent investment in the bonds of the Reference Entity. The Issuer and its affiliates do not provide any representation regarding the performance of the Reference Entity. Each investor must make its own independent investigation of the Reference Entity.
• Successor Reference Entity: In some circumstances the Reference Entity may be replaced with a successor entity (for example in the case of an acquisition or merger affecting the Reference Entity). This may expose investors to new credit risks and may change the probability of a Credit Event and consequently may adversely affect the Units.
• Value of the Units before the Maturity Date: The Final Value of the Units is calculated by reference to the Reference Entity and its overall credit worthiness between the First Credit Event Occurrence Date to the Scheduled Last Credit Event Occurrence Date. The market value of the Units before the Maturity Date will be determined by many factors. These include: value of bonds of the Reference Entity; the likelihood of a Credit Event occurring, volatility of bonds in the Reference Entity; time to Maturity; interest rates; general market risks, including but not limited to, general index movements, macro-economic risks and supply and demand; fees and costs; and perceived creditworthiness of the Hedge Counterparty. Any currency hedging mechanisms embedded in the Units may not be applicable if a Credit Event occurs or the Units otherwise terminate prior to the scheduled Maturity Date. Investors should be aware the Units are designed to be held to Maturity and are not designed to be a trading instrument. The Issuer may issue additional series of Units in the future. The Issue Price for these Units will reflect (amongst other things) the prevailing market conditions at the commencement date of those units, and which may be different to the market conditions as at the date of Units offered under this Term Sheet PDS. You should invest in Units offered under this Term Sheet PDS only if you are satisfied that the Units are appropriate for your individual circumstances.
• Liquidity risk: You may not be able to realise your investment when you want to. The Issuer Buy-Back facility is at the discretion of the Issuer. Issuer Buy-Back requests are determined in the Issuer’s discretion. Issuer Buy-Back requests may be held over and may not be executed at all. Generally, the Issuer would only reject or defer an Issuer Buy-Back request if it is unable to adequately unwind its hedging arrangements.
• Withdrawal risks: There is a risk that Investors will lose some of their Total Investment Amount if Investors dispose of the Units before Maturity. There is no assurance that the Issuer will buy back your Units (and there is no obligation on the Issuer to do so). Buy-Back requests are irrevocable, and the Issuer might not accept a request immediately but hold it over. This may delay the processing of an Investor’s Buy-Back request and may impact the Buy-Back Price an Investor receives and, if the Issuer does not buy back your Units, you may not be able to realise your investment until the Maturity Date.
• Early Maturity: The Units may mature early following an Early Maturity Event, including as a result of an Adjustment Event or Market Disruption Event or if a Credit Event or a Compulsory Early Redemption occurs or if your request for an Issuer Buy-Back is accepted. The Issuer may nominate an Early Maturity Event in certain circumstances, including if its hedging arrangements are terminated early, certain corporate actions are taken by a Reference Entity or if the Issuer has to pay an additional amount as a result of a Change of Law. In certain circumstances the Hedge Counterparty may terminate the Hedge Agreement (for example, if the Hedge Counterparty determines that its obligations have become unlawful or illegal, or following an event of default, or there is a change in tax law affecting the obligations of the Hedge Counterparty, or an extraordinary event or circumstance prevents the Hedge Counterparty from performing its obligations, or the Hedge Counterparty experiences a materially increased cost in, or a disruption to, its own hedging). If the Units are subject to Early Maturity for any reason you will not be entitled to a refund of the Investment Amount and the amount that the Issuer receives from the Hedge Counterparty may be significantly less than would have otherwise occurred had the Investment reached Maturity on the Scheduled Maturity Date. If there is an Early Maturity Event, then any Final Value will not apply on the portion of your Units subject to the Early Maturity Event and you will receive the Early Maturity Amount or Termination Payment (if any) as described in section 1.9 of the Master PDS. In this instance you may lose your entire Total Investment Amount.
• Indirect Investment Risk: Compared to a direct investment (including bonds) in the Reference Entity, the investor will not be entitled to receive dividend or other payments (if any) nor have any voting rights for corporate actions to do with the Reference Entity, will have no claim against the Reference Entity and no interest in or rights under any obligation of the Reference Entity, including if a Credit Event occurs. An investment in the Units is not equivalent to an investment in the bonds of the Reference Entity.
• Conflicts of interest: C2 Specialist Investments Pty Ltd and its affiliates, and sister companies (“C2 Financial Group”) may face possible conflicts of interest in connection with its roles as Issuer, Arranger and any other role as described in this Term Sheet PDS and Master PDS. For example, C2 Financial Group entities may engage in other financial service activities or trade in the underlying shares of the Reference Entity or Delivery Assets or financial instruments linked thereto for their own account, or for the account of others. All of these activities may result in conflicts of interest with respect to the financial interests of the C2 Financial Group.
• Hedge Risks: The following risks may affect the Hedge Agreement, and in turn affect the value of your Units or result in an Early Maturity Event:
  • The occurrence of any event that prevents, restricts or delays the Hedge Counterparty from converting or delivering relevant currencies or otherwise leads to a delayed and/or reduced payment under the Hedge Agreement (including due to a Credit Event).
  • The Hedge Counterparty may make certain modifications to the Hedge or in certain circumstances terminate the Hedge without the consent of the Issuer.
  • Foreign tax legislation may impose taxes on payments made by the Hedge Counterparty, received by the Hedge Counterparty or on payments made under the Hedge.
• Counterparty risk of Issuer, Hedge Counterparty, Security Trustee: If the Issuer goes into liquidation or receivership or statutory management or is otherwise unable to meet its debts as they fall due, the Investor could receive none, or only some, of the amount invested. However, the Issuer is a special purpose vehicle that only Issues Deferred Purchase Agreement or other structured products and has put in place a corporate structure which is designed to give Investors security over the Issuer’s rights against the relevant Hedge Counterparty (through the Hedge Security Deed and Security Trust Deed) in the event of the Issuer becoming insolvent.
• Custodian risk: The Custodian is a related party to the Issuer. The primary role of the Custodian is to hold the beneficial interest in the Delivery Parcel and arrange for the sale of the Delivery Parcel if the Agency Sale Option is elected by the Investor at Maturity. The role of the Custodian is set out in the Custody Deed. There is a risk that the Custodian may be unable to perform its obligations under the Custody Deed and that Investors may not receive the Sale Monies or other amounts or assets due to them when due under the Terms. However, the Custodian is a special purpose vehicle set up to act as Custodian for the Issuer’s Deferred Purchase Agreement or other structured products and has no other obligations.
• Default under Hedge for another Series risk: There is a separate Hedge for each Series and, except in the case of an insolvency event, the right to set off and net payments applies separately to the Hedge for each Series. However, if there is an insolvency event (in relation to either the Issuer or the Hedge Counterparty) under a Hedge, then the Hedges for all Series may terminate and the relevant Hedge Counterparty and the Issuer will have the right to set off and net the amounts payable on termination across the Hedges for all Series (where the Hedge Counterparty is the counterparty).
• Volatility Risk: The market price and or performance of the Units may be volatile and will be affected by, amongst other things, the time remaining to the Maturity, prevailing credit spreads and the creditworthiness of the Reference Entity which in turn may be affected by the economic, financial and political events in one or more jurisdictions.
• Correlation Risk: Risks relating to the Units may be correlated or compounded, for example, a Credit Event in the Reference Entity may create counterparty risk for a hedge instrument as a consequence and such correlation and/or compounding may result in increased volatility and/or in increased losses for holders of credit derivatives and the Hedge Agreement which will ultimately flow through to the Units.
• Reference Entity Risk: The actions of the Reference Entity (for example, merger or demerger or the repayment or transfer of indebtedness) may adversely affect the value of the Units. The views of market participants and/or legal counsel may differ as to how the terms of market standard credit default swaps, and the corresponding terms of the Hedge Agreement, should be interpreted in the context of such actions, or such terms may operate in a manner contrary to the expectations of market participants and/or adversely to the interests of Unit holders.
• Access to Information Risk: The information available for the Reference Entity may be different from, and in some cases less than, the information available for entities that are subject to the reporting requirements under the Corporations Act. The Issuer does not make any representation as to the accuracy or completeness of any information available with respect to the Reference Entity. The Issuer has no duty to disclose any information with respect to any Reference Entity. Prospective investors must therefore make an investment decision based upon their own due diligence and purchase the Units in the knowledge that non-public information may exist which will not be known to Investors and which, if known, may affect the Investor’s investment decision.
• Determination Binding Risk: Any determination by the Issuer is binding on the holders of the Units. A determination includes any determination in relation to an amount or of any state of affairs, circumstance, event or other matter, or the formation of any opinion or the exercise of any discretion required or permitted to be determined, formed or exercised by the Issuer shall (in the absence of manifest error) be final and binding.