On June 30, 2020, Apollo Commercial Real Estate Finance, Inc. completed a private securitization arrangement (the ‘Securitization Arrangement’) with Barclays Bank plc (‘Barclays’), pursuant to which it refinanced five commercial mortgage loans with outstanding principal balances in aggregate of £729.7 million and €217.1 million or $1.15 billion in aggregate, assuming conversion at the exchange rates prevailing at June 30, 2020) (the Sterling-denominated loans, ‘GBP Loans’ and the Euro-denominated loan, ‘EUR Loans’ and, collectively, the ‘Underlying Loans’), originated by certain affiliates of the Company in respect of properties located throughout Europe, which were previously primarily financed through repurchase arrangements (the ‘Original Financing Arrangements’) with Barclays. On the Closing Date, ACRE Debt 2 PLC, a newly formed insolvency-remote UK public limited company (the ‘Issuer’) and a consolidated subsidiary of the Company under U.S. Generally Accepted Accounting Principles, issued four classes of notes, the Class A GBP Notes and the Class A EUR Notes (collectively, as issued on the Closing Date, the ‘Class A Initial Notes’) and the Class B GBP Notes and the Class B EUR Notes (collectively, as issued on the Closing Date, the ‘Class B Initial Notes’ and, together with the Class A Initial Notes, the ‘Initial Notes’), each in the principal amount and having the characteristics and designations set forth in the table and description below, pursuant to the terms of a trust deed dated June 30, 2020 (the ‘Trust Deed’) by and among the Issuer and U.S. Bank Trustees Limited (the ‘Trustee’) and the incorporated terms memorandum dated June 30, 2020 (the ‘ITM’), by and among, the Issuer, ACRE Debt Holdings Limited, as holder of the voting share of the Issuer, ACREFI B, LLC (‘ACREFI B’), as seller, Class B Noteholder and Residual Certificateholder, ACREFI BN, LLC (the ‘Servicer’), as servicer, the Trustee, as trustee, Barclays, as the realisation agent and Class A Noteholder, and other transaction parties identified in the ITM. ACREFI B and the Servicer are wholly-owned indirect subsidiaries of the Company. Although the Initial Notes have a stated maturity of August 2025, unless redeemed or repaid prior thereto, it is anticipated that the Initial Notes will be paid in advance of the stated maturity date as the Underlying Loans are repaid or ACREFI B repurchases the Underlying Loans from the Issuer in accordance with the terms of the New Financing Arrangements. The estimated minimum weighted average life of the Initial Notes is 36 months. The estimated minimum weighted average life of the Initial Notes has been calculated assuming certain collateral characteristics, including that there are no prepayments, defaults or delinquencies on the Underlying Loans and certain other modeling assumptions. There can be no assurances that such assumptions will be met. The Initial Notes represent secured, limited recourse obligations of the Issuer payable solely from the Underlying Loans acquired by the Issuer from ACREFI B under a Global Master Repurchase Agreement (the ‘New Financing Arrangements’) which have been pledged pursuant to a deed of charge (the ‘Deed of Charge’). In addition, ACREFI B transferred two additional commercial mortgage loans to the Issuer with outstanding principal balances in aggregate of £26.0 million and €5.3 million (or $38.2 million in aggregate, assuming conversion at the exchange rate prevailing at June 30, 2020), which are also pledged under the Deed of Charge (the ‘Additional Collateral’). The proceeds from the issuance of the Initial Notes, after payment of certain fees and expenses, were used to finance the Underlying Loans. The New Financing Arrangements do not contain any mark-to-market or daily margining provisions. The New Financing Arrangements include provisions which may require ACREFI B to partially prepay individual secured debt arrangements underlying the New Financing Arrangements in certain circumstances. These include (i) where a material default (including insolvency, maturity default, financial covenant breach or payment default, subject to the Servicer’s ability to waive such defaults in accordance with the servicing and realisation agreement, as described below) occurs in relation to the relevant Underlying Loan, to the extent that following such default, the market value of the relevant Underlying Loan is less than a specified threshold and (ii) where certain loan-to-value financial covenants (‘LTV Covenants’) for a secured debt arrangement are not satisfied. The LTV Covenants are not applicable during the initial six months following the Closing Date. In connection with the New Financing Arrangements, the Company, through its subsidiaries, repaid €16.5 million (or $18.5 million, assuming conversion at the exchange rate prevailing at June 30, 2020) under the Original Financing Arrangements and terminated them. The Issuer may issue, from time to time, additional Class A GBP Notes and Class A EUR Notes (together with the Class A Initial Notes, the ‘Class A Notes’) to Barclays and additional Class B GBP Notes and Class B EUR Notes (together with the Class B Initial Notes, the ‘Class B Notes’, and together with the Class A Notes, the ‘Notes’) to ACREFI B, as well as Class A USD Notes and Class B USD Notes, pursuant to the terms and conditions of the Trust Deed and the other transaction documents. The proceeds of any issuances of additional Notes, or Class A USD Notes or Class B USD Notes, will be used to purchase additional assets, as agreed between the Company and the holders, from time to time, of the Class A Notes, pursuant to the New Financing Arrangements in respect of the Notes and pursuant to a newly agreed Global Master Repurchase Agreement in respect of any Class A USD Notes or Class B USD Notes. The Company continues to provide a guarantee of the obligations of ACREFI B under the New Financing Arrangements (the ‘Guaranty’). Under the terms of the Guaranty, the Company is subject to customary covenants, including financial covenants with respect to minimum tangible net worth, maximum ratio of total indebtedness to consolidated tangible net worth, and minimum liquidity.