HS1 Limited. STID Proposal: Explanatory Q&A

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1 HS1 Limited STID Proposal: Explanatory Q&A 1 Who is entitled to receive the STID Proposal? In accordance with Clauses 12.2 and 12.3 of the STID, the HS1 Security Trustee, the Secured Creditor Representatives of each HS1 Secured Creditor and the Secured Creditor Representatives of each Issuer Secured Creditors are entitled to receive the STID Proposal. 2 Which category of voting matters are covered in the STID Proposal and do they give rise to any Entrenched Rights? The STID Proposal is in respect of an Extraordinary Voting Matter and does not give rise to any Entrenched Rights. A certification in this regard is provided by HS1 in the STID Proposal and the STID Voting Request. 3 Why does HS1 believe that Entrenched Rights are not applicable? Entrenched Rights are defined in the Master Definitions Agreement and include a certain set of fundamental rights of the creditors that relate to core rights of the creditors such as a delay in the date of which payments are made, currencies or amounts of payments made, ranking and enforcement, certain core intercreditor matters etc. The full definition of Entrenched Rights (as extracted from the Master Definitions Agreement) is set out in Schedule 1 hereto. None of these core matters are affected by the matter set out in the STID Proposal. A certification in this regard is provided by HS1 in the STID Proposal and the STID Voting Request. 4 Who is permitted to vote on the STID Proposal? In accordance with Clause 10.1 of the STID, only the Qualifying HS1 Secured Creditors, acting through their Secured Creditor Representatives, are permitted to vote on the STID Proposal. This includes the holders of the Qualifying HS1 Senior Debt, which, in respect of the STID Proposal in question is: 4.1 the principal amount outstanding under each IBLA corresponding to the Bonds; 4.2 the principal amount outstanding under the PP Notes; and 4.3 the principal amount outstanding under the Initial Authorised Credit Facilities Agreement (as amended from time to time). The HS1 Secured Creditors under the Liquidity Facility Agreement and HS1 Hedging Agreements are not Qualifying HS1 Secured Creditors for the purposes of this STID Proposal. 1

2 5 What is the Decision Period for voting? 6 February 2019 (Wednesday) Launch of STID Proposal 13 Febuary 2019 (Wednesday) Deemed consent of the voting catetory 14 February 2019 (Thursday) Commencement of decision period for voting 4 March 2019 (Monday) Deadline for USPP Noteholders and the Bank Lenders to vote and for the bondholders to vote via clearing systems 5 March 2019 (Tuesday) Deadline for all Secured Creditor Representatives to send their votes to the HS1 Security Trustee 6 March 2019 (Wednesday) End of Decision Period for voting The Decision Period shall commence from the expiry of five Business Days of the receipt of this STID Proposal. The approval of the HS1 Security Trustee is sought within 15 Business Days from the date of the commencement of the Decision Period. The Decision Period expires on 7 March The HS1 Secured Creditors and the Issuer Secured Creditors who are entitled to vote on the STID Proposal are required to submit their votes 2 Business Days prior to the end of the Decision Period; the HS1 Secured Creditor Representatives are required to submit their votes 1 Business Day prior to the end of the Decision Period, and the HS1 Security Trustee is required to submit its votes to HS1 upon the end of the Decision Period. 6 What is the quorum for the approval of the STID Proposal? The quorum required in respect of the STID Proposal is one or more Participating Qualifying HS1 Secured Creditors representing in aggregate at least 20 per cent. of the entire Outstanding Principal Amount of all Qualifying HS1 Senior Debt in accordance with Clause 15.2 of the STID. If the required quorum has not been met within the Decision Period, the Quorum Requirement shall be reduced to one or more Participating Qualifying HS1 Secured Creditors representing, in aggregate, 10 per cent. of the aggregate Outstanding Principal Amount of all Qualifying HS1 Senior Debt and the Decision Period shall be extended (in accordance with Clause 15.2 of the STID). 7 What is the voting threshold for the consent request to be approved? The STID Proposal consents constitute an Extraordinary Voting Matter. If the quorum is met, then the proposed resolution in the STID Proposal may be passed by a majority of per cent. of the Voted Qualifying Debt. The vote closes as soon as the Participating Qualifying HS1 Secured Creditors representing at least per cent. of the aggregate Outstanding Principal Amount of all Qualifying HS1 Senior Debts have voted in favour of the STID Proposal (even if the Decision Period is still ongoing at that stage). 8 How will the votes cast by different types of debt count towards the STID Proposal? Is there a drag provision resulting in all the debt of a particular type being voted the same way? The votes cast by the different kinds of debt will be counted towards the STID Proposal as follows: 2

3 8.1 Bonds Bonds that are identical in all respects (save for the Issue Date, Interest Commencement Date and Issue Price) are treated as a single tranche in relation to a vote on the STID Proposal In respect of a tranche, the aggregate Principal Amount Outstanding of each Bond which votes will be counted in respect of quorum and majorities in respect of the STID Proposal on a pound for pound basis Notwithstanding above, in respect of a tranche, if: (A) the holders of 25 per cent. or more of the Principal Amount Outstanding of such tranche cast their vote in relation to the STID Proposal; and (B) the holders of 75 per cent. or more of the Principal Amount Outstanding of the Bonds that voted vote a particular way, then the entire Principal Amount Outstanding of such tranche shall be deemed to have voted the same way However, if 9.1.3(A) is satisfied and 9.1.3(B) is not satisfied, then the entire Principal Amount Outstanding of such Tranche of Bonds will count for the purposes of the STID Proposal Quorum Requirements but not the requisite majority, for which they will count on a pound for pound basis. 8.2 PP Notes issued pursuant to the Note and Guarantee Agreement dated 29 October 2012 and subsequently amended pursuant to Section 24 thereto (the 2012 PP Notes ) Section 2.8(a) of the Initial PP Note SCR Agreement stipulates a quorum of at least 25 per cent. of the entire principal outstanding amounts under the 2012 PP Notes in respect of a STID Proposal According to section 2.8(b) of the Initial PP Note SCR Agreement, if this quorum is satisfied, and holders of: more than per cent. of the principal outstanding amounts of the 2012 PP Notes that cast their votes, voted in favour of the STID Proposal, then the entire principal outstanding amount of the 2012 PP Notes shall be deemed to have approved the consents requested in the STID Proposal; According to section 2.8(c) of the Initial PP Note SCR Agreement, if this quorum is satisfied, but a majority of: more than per cent. of the principal outstanding amounts of the 2012 PP Notes that cast their votes, has not been obtained in favour of the STID Proposal, then the votes cast will be divided between votes cast in favour and votes cast against, on a pound for pound basis; According to section 2.8(c) of the Initial PP Note SCR Agreement, if the quorum is not satisfied, then the votes cast will be divided between votes cast in favour and votes cast against, on a pound for pound basis. 8.3 PP Notes issued pursuant to the Note and Guarantee Agreement dated 14 December 2016 (the 2016 PP Notes ) Section 2.8 of the PP Note SCR Agreement in respect of the 2016 PP Notes (read together with the Voting Notification Certificate as defined therein which was delivered to the HS1 Security Trustee on or about the date of the 2016 PP Notes) stipulates a quorum of at least 50.1 per cent. of the entire principal outstanding amounts under the 2016 PP Notes in respect of a STID Proposal According to the Section 2.8(b) of the PP Note SCR Agreement in respect of the 2016 PP Notes: if this quorum is satisfied, and holders of: per cent. or more of 3

4 the principal outstanding amounts of the 2016 PP Notes that cast their votes, have voted in favour of the STID Proposal, the entire principal outstanding amount of the 2016 PP Notes shall be deemed to have approved the consents requested in the STID Proposal; According to the Section 2.8(c) of the PP Note SCR Agreement in respect of the 2016 PP Notes read with the Voting Notification Certificate, if the quorum is satisfied, but a majority of: the holders of per cent. or more of the principal outstanding amounts of the 2016 PP Notes that cast their votes, has not been obtained in favour of the STID Proposal, then the votes cast will be divided between votes cast in favour and votes cast against, on a pound for pound basis; According to the Section 2.8(c) of the PP Note SCR Agreement in respect of the 2016 PP Notes read with the Voting Notification Certificate, if the quorum has not been satisfied with respect to an EVM, then the votes cast will be divided between votes cast in favour and votes cast against, on a pound for pound basis. 8.4 Initial Authorised Credit Facilities Agreement The Initial Authorised Credit Facilities Agreement stipulates that the consent of the Majority Lenders (i.e. 66 2/3 per cent. or more of the Total Commitments) shall be required for the purposes of approving a STID Proposal If the Majority Lenders consent is not obtained, the votes in respect of the relevant Authorised Credit Facility will be divided between votes cast in favour and votes cast against, on a pound for pound basis The Initial Authorised Credit Facilities Agreement read with Clause 11.4 of the STID stipulates that if any Lender fails to respond to the STID Proposal within the requested Decision Period, its Commitment and/or participation shall not be included when ascertaining the Total Commitments or participations for the purposes of the STID Proposal quorum requirements and majorities. 4

5 Entrenched Rights are matters which: Schedule 1 Entrenched Rights (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) would delay the date fixed for payment of principal or interest in respect of the relevant HS1 Secured Creditor's debt or would reduce the amount of principal or the rate of interest payable in respect of such debt; would bring forward the date fixed for payment of principal or interest in respect of an HS1 Secured Creditor's debt or would increase the amount of principal or the rate of interest payable on any date in respect of the HS1 Secured Creditor's debt; would have the effect of adversely changing any of the HS1 Post Enforcement Priority of Payments, the HS1 Pre-Enforcement Priority of Payments or application thereof in respect of an HS1 Secured Creditor (including, in the case of the Issuer, any Issuer Secured Creditor that would be adversely affected by such change); would have the effect of adversely changing the application of any proceeds of enforcement of the HS1 Security Documents; would result in the exchange of the relevant HS1 Secured Creditor's debt for, or the conversion of such debt into, shares, notes or other obligations of any other person; would change or would relate to the currency of payment due under the relevant HS1 Secured Creditors debt (other than due to the U.K. adopting the euro); would change or would relate to any existing obligation of a Obligor to gross up any payment in respect of the relevant HS1 Secured Creditor's debt in the event of the imposition of withholding taxes (including, in the case of the Issuer, any Issuer Secured Creditor that would be adversely affected by such change); would change or would have the effect of changing (i) any of the following definitions: Qualifying HS1 Secured Creditors, Qualifying HS1 Senior Debt, STID Proposal, Discretion Matter, Ordinary Voting Matter, Extraordinary Voting Matter, Voted Qualifying Debt, Reserved Matter, Entrenched Right, HS1 Secured Liabilities; (ii) the Decision Period, Quorum Requirement or voting majority required in respect of any Ordinary Voting Matter, Extraordinary Voting Matter, Qualifying HS1 Secured Creditor Instruction Notice, Enforcement Instruction Notice or Further Enforcement Instruction Notice; (iii) any of the matters that give rise to Entrenched Rights under the STID or (iv) clause 16.1 (Scope of Entrenched Rights) of the STID; would change or have the effect of changing clause 10.3 (Participating Qualifying HS1 Secured Creditors) of the STID; would change or have the effect of changing Schedule 3 (Reserved Matters) of the STID; in respect of each Hedge Counterparty: (i) would change or would have the effect of changing any of the following definitions: HS1 Hedge Replacement Premium, Hedging Agreement or Issuer Secured Creditor Entrenched Right; 5

6 (ii) would change or would have the effect of changing the limits specified in paragraph 15 (Interest Rate Risk Principles) of Schedule 7 (Hedging Policy) of the Common Terms Agreement; (iii) would change or have the effect of changing the definition of Permitted Hedge Termination or any of the Hedge Counterparties' rights to terminate the Hedging Agreements as set out in the Hedging Policy; (iv) would change or have the effect of changing sub clause 7.1 (Loan Events of Default) of the Common Terms Agreement; (v) would change or have the effect of changing the definitions of Loan Acceleration Notice or Loan Enforcement Notice or would change or have the effect of changing clause 19.2 (Consequences of Delivery of Loan Acceleration Notice) of the STID or clause 20 (HS1 Post-Enforcement Priority of Payments) of the STID; (vi) would change or have the effect of changing the purpose of the Liquidity Facility so as to result in it no longer being available to service payments due under the Hedging Agreements; and (vii) would change or have the effect of changing paragraph 13 (Disposals) of Part C (General Covenants) of Schedule 2 (Security Group Covenants) of the Common Terms Agreement; and (l) in respect of each Liquidity Facility Provider, would change the effect of clause 20 (HS1 Post Enforcement Priority of Payments) of the STID or would affect the ability of such Liquidity Facility Provider to enforce its rights under a Liquidity Facility Agreement; 6