Subordination Agreement to Institutional Lender

This section explains the Subordination Agreement you acknowledge on the Confirm screen when you lend to an affected Lending Strategy. It is a summary of an arrangement that is disclosed in full, for each region, on the strategy's Details page and in the document itself.

In some Lending Strategies, the Credit Originator has a senior loan facility from an Institutional Lender, and lending through Kasu to that Credit Originator is contractually subordinated to it under a subordination and priority deed. The Institutional Lender is named on the Details page of each affected strategy, together with the region and the Lending Options it applies to.

In the ordinary course, repayments to Kasu lenders continue as normal. The arrangement matters if the Credit Originator fails to meet its obligations to the Institutional Lender under the facility agreement. Those obligations are financial and procedural, including repayment and reporting obligations. If the Credit Originator breaches them, repayments to Kasu lenders may be halted unless and until the Credit Originator takes the rectification action the Institutional Lender requires.

In that situation, the subordination and priority deed means:

• the Institutional Lender has the prior claim over loan repayments, security and recovery proceeds, and Kasu lenders' right to repayment ranks behind it;
• repayments to Kasu lenders may be delayed, reduced or lost if the Institutional Lender's claims are not fully satisfied first;
• while the facility agreement and the deed are in place, enforcement rights, receipt of payments and the application of recoveries on behalf of Kasu lenders are restricted, which may affect the ability to repay Kasu lenders on time and in full;
• the Institutional Lender has no obligation to marshal assets or to act in a way that benefits Kasu lenders, which may limit recovery prospects for subordinated loans.

Lending to an affected strategy therefore carries higher credit and liquidity risk than lending on the same terms as the Institutional Lender, including an elevated risk of delayed payment, or partial or total loss, of principal and interest.

The Institutional Lender typically funds the most senior position across the Credit Originator's Lending Strategies, so Kasu lenders may only be offered the Lending Options that rank behind it. Where a Lending Option is described as senior but an Institutional Lender holds the facility, that option still ranks behind the Institutional Lender. If the most senior Lending Option of an affected strategy is ever offered to Kasu lenders, loans in it remain subordinated under the deed.

By acknowledging the Subordination Agreement when you lend, you accept that your loan ranks behind the Institutional Lender on these terms. You should consider this carefully in your lending decision.