Global Diversified Investment Grade Income Trust II - Status of the disengagement transaction



    MONTREAL, Aug. 22 /CNW Telbec/ - Further to the recent judgment from the
Court of Appeal of Ontario on the proposed ABCP plan of arrangement, Global
Diversified Investment Grade Income Trust II ("Global DIGIT II") (TSX: GII.UN)
is making an update on the status of its disengagement transaction with
Silverstone Trust ("Silverstone").

    Assets of Global DIGIT II and Withholding of Payments by Silverstone

    The assets of Global DIGIT II are partly comprised of three credit
default swaps ("GD-II Swaps") entered into with Silverstone and the related
collateral to secure obligations under the GD-II Swaps. The GD-II Swaps are
mirrored by back-to-back credit default swaps (the "Silverstone Swaps")
between Silverstone and Deutsche Bank A.G. (the "Bank"). Silverstone also
entered into another swap with the Bank, pursuant to which and in order to
secure obligations toward the Bank, it issued asset-backed commercial paper
("ABCP") to purchase collateral which was pledged to the Bank.
    The payment provisions under the Silverstone Swaps are mirrored by those
of the GD-II Swaps, such that for each payment obligation of the Bank to
Silverstone under the Silverstone Swaps, there is a corresponding payment
obligation from Silverstone to Global DIGIT II and vice versa. However, in
certain circumstances, Silverstone's position is that it has the right to
withhold payments received from the Bank. On August 14, 2007, as Silverstone
had not rolled over its matured ABCP and ceased payments on such ABCP, it
decided to withhold payments to Global DIGIT II.
    As a result of diverging views with respect to the rights of Silverstone
and Global DIGIT II with respect to the amounts received from the Bank, the
amounts withheld were segregated into an escrow account pursuant to a
Standstill Agreement entered into by Global DIGIT II and Silverstone. In the
escrow account an amount of about $0.83 per unit has been accumulated as of
July 31, 2008.

    The Disengagement Transaction

    On December 21, 2007, Global DIGIT II entered into an agreement with
Silverstone in order to negotiate in good faith a transaction pursuant to
which Silverstone would effectively be replaced by the Bank as counterparty to
the GD-II Swaps that are presently in force between Global DIGIT II and
Silverstone (the "Disengagement Transaction") and would severe all relations
between Global DIGIT II and Silverstone and disengage Silverstone from Global
DIGIT II's current structure.

    The Plan

    On March 20, 2008, noteholders members of the Pan-Canadian Investors
Committee for Third-Party Structured Asset-Backed Commercial Paper (the
"Committee") filed with the Ontario Superior Court of Justice a plan of
compromise and arrangement (the "Plan") pursuant to the Companies' Creditors
Arrangement Act in respect of the ABCP of certain issuer trustees, including
the issuer trustee of Silverstone.
    On June 5, the Plan was sanctioned by the Court and further to an appeal
to the Court of Appeal of Ontario by certain dissident noteholders holding
ABCP, this court unanimously dismissed the appeal on August 18 and upheld the
Plan as proposed. The judgment of the Court of Appeal of Ontario could be
appealed to the Supreme Court of Canada by dissident noteholders with leave of
said Court. The leave to appeal, if granted, and a timetable for a hearing
before the Supreme Court is uncertain. It is envisaged by the Committee that
if the leave to appeal is not granted by the Supreme Court or if there is no
appeal, the implementation of the Plan would occur on or about September 30,
2008.
    Completion of the Disengagement Transaction and the resumption of the
distributions and redemptions depend on the successful implementation of the
Plan and is expected to become effective on the date that the Plan is
implemented. If the Disengagement Transaction is completed, distributions and
redemptions would resume, and it is anticipated that the distributions would
generally be at the same level as was previously the case (subject to losses
upon the occurrence of credit events and the costs of the Disengagement
Transaction which cannot presently be assessed), until the next reset date
(March 2, 2010). Funds available to pay distributions and redemptions would
flow directly from the Bank and would no longer be dependent on Silverstone's
ability to renew or replace its outstanding indebtedness or otherwise be
subject to any claim by Silverstone to withhold payments to Global DIGIT II.
Funds held in escrow under the Standstill Agreement would be released in full
to Global DIGIT II, as well as the amounts which have been accreting in
respect of the residual amount that would otherwise have been payable to
Global DIGIT II at the maturity date of the GD-II Swaps which amounted to
approximately $0.54 per unit as of July 31, 2008.

    About Global DIGIT II

    Global DIGIT II provides an economic interest in an equity tranche of
credit default swap agreements in respect of portfolios of mortgage-backed
securities, asset-backed securities, structured finance securities and
synthetic corporate exposures.




For further information:

For further information: François Rivard, (514) 879-6405,
http://info.fbn.ca/trusts

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Global Diversified Investment Grade Income Trust II

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