1043-00001 · Ironhaven Holdings · Tax

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 125 Broad Street New York, NY 10004

MEMORANDUM

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I. Executive Summary

This memorandum sets forth our analysis of the material United States federal income tax, Delaware, Virginia, and Federal Republic of Germany tax implications arising from the proposed $950,000,000 Senior Secured Term Loan B facility (the "Term Loan" or "Facility") to be entered into by Ironhaven Data Centers LLC ("IHDC" or the "Borrower"), a Delaware limited liability company, and Ironhaven Frankfurt GmbH ("IHDC Frankfurt" or the "Co-Borrower"), a German limited liability company (Gesellschaft mit beschränkter Haftung), as co-borrowers.

IHDC is a Delaware limited liability company that, for United States federal income tax purposes, is treated as a disregarded entity (or, alternatively, as a partnership — entity classification election status should be confirmed as set forth in our recommendations below). If IHDC is properly treated as a disregarded entity, its sole member, Ironhaven Holdings Inc., a Delaware corporation ("Holdings"), is the relevant taxpayer for US federal income tax purposes with respect to income, deductions, and obligations attributable to IHDC. IHDC Frankfurt is a German GmbH, wholly owned by IHDC, and is a separate taxable entity under both US and German tax law.

The Term Loan is structured as a two-tranche senior secured credit facility consisting of: (i) a US dollar-denominated tranche in the aggregate principal amount of $675,000,000 (the "USD Tranche"), bearing interest at a rate of SOFR plus 425 basis points (with a SOFR floor of 0.50%); and (ii) a euro-denominated sub-tranche in the aggregate principal amount of €253,571,429 (approximately $275,000,000 at an exchange rate of EUR/USD 1.0846) (the "EUR Sub-Tranche"), bearing interest at a rate of EURIBOR plus 425 basis points (with a EURIBOR floor of 0.00%). The Term Loan is being offered at an original issue discount ("OID") of 50 basis points (issue price of 99.50), resulting in net proceeds to the Borrowers of approximately $945,250,000. The Term Loan matures on June 3, 2031, seven years from the anticipated closing date of June 3, 2024.

The lender syndicate comprises seven lenders, including two non-US entities: NordBrücke AG, a German Aktiengesellschaft regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht ("BaFin") with its principal offices in Frankfurt am Main, and Osprey Insurance Capital, Ltd., a Bermuda exempted company with its registered office in Hamilton, Bermuda. The presence of these non-US lenders gives rise to important US withholding tax and FATCA compliance considerations that are addressed in detail in Sections V and VI of this memorandum.

Our principal tax conclusions are as follows:

1. Debt Classification. The Term Loan should be respected as indebtedness for US federal income tax purposes under the multi-factor debt-equity analysis. The terms of the Facility — including a fixed maturity date, market-rate stated interest, mandatory amortization, unconditional obligation to repay, arm's-length lending terms, and the absence of equity participation features — support debt treatment. Accordingly, interest expense on the Term Loan should be deductible by the Borrower (through Holdings as the relevant taxpayer) under IRC § 163, subject to the limitations discussed in Section III.C below.

2. OID Treatment. The 50 basis point discount gives rise to aggregate OID of $4,750,000. Because this amount falls below the de minimis OID threshold of $16,625,000 (calculated as 0.25% × 7 years × $950,000,000), the OID may be treated as de minimis and recognized upon repayment rather than accrued over the life of the Term Loan using the constant-yield method. However, prepayment events may accelerate recognition of de minimis OID.

3. Withholding Tax — Non-US Lenders. Interest payments to NordBrücke AG and Osprey Insurance Capital, Ltd. are subject to the 30% statutory US withholding tax under IRC §§ 871(a) and 881(a), unless reduced or eliminated by an applicable treaty or statutory exemption. For NordBrücke AG, the US-Germany Income Tax Treaty (as amended by the 2006 Protocol) provides a 0% withholding rate on interest under Article 11, subject to Limitation on Benefits ("LOB") qualification and delivery of a valid IRS Form W-8BEN-E. For Osprey Insurance Capital, Ltd., the portfolio interest exemption under IRC § 881(c) should be available (since Osprey is not a "bank" within the meaning of § 881(c)(3)(A) and, based on our understanding, is not a 10% shareholder or a related controlled foreign corporation), subject to delivery of a valid IRS Form W-8BEN-E and confirmation that the Term Loan is in "registered form."

4. FATCA Compliance. Both NordBrücke AG and Osprey Insurance Capital, Ltd. are located in jurisdictions that have entered into Model 1 Intergovernmental Agreements ("IGAs") with the United States. Provided each entity complies with its applicable IGA reporting obligations and provides a valid Global Intermediary Identification Number ("GIIN") on its Form W-8BEN-E, no FATCA withholding should apply.

5. German Trade Tax (Gewerbesteuer) Interest Deduction Limitations. IHDC Frankfurt is subject to the Hinzurechnung (add-back) rule under § 8 Nr. 1 GewStG, which requires 25% of all interest expense (subject to a €200,000 annual exemption) to be added back for Gewerbesteuer purposes. This results in an estimated additional annual trade tax cost of approximately €805,000 attributable to the EUR Sub-Tranche interest, which should be incorporated into the Frankfurt campus financial projections.

6. Transfer Pricing. To the extent IHDC on-lends any proceeds from the USD Tranche to IHDC Frankfurt (in addition to or in lieu of IHDC Frankfurt's direct borrowing under the EUR Sub-Tranche), such intercompany loan must be priced at arm's length under both German transfer pricing rules (§ 1 AStG) and US transfer pricing rules (IRC § 482). This analysis is addressed in a separate Transfer Pricing / Intercompany Loan Memorandum.

7. State Tax Implications. State tax implications are manageable. Delaware imposes no entity-level income tax on IHDC as a disregarded entity (though Holdings is subject to Delaware franchise tax). Virginia imposes a 6% corporate income tax on income apportioned to the Commonwealth (with interest expense generally deductible), and Virginia recordation tax will apply to the Deed of Trust filing in Loudoun County (estimated at $1,187,500). No state-level withholding applies to interest payments under the Term Loan.

II. Background and Transaction Description

A. The Borrower and Corporate Structure

Ironhaven Data Centers LLC. IHDC is a Delaware limited liability company (EIN 84-3291057) with its principal executive offices located at 4500 Dominion Ridge Boulevard, Suite 300, Ashburn, Virginia 20147. IHDC is the primary operating entity through which the Ironhaven data center business is conducted in the United States.

IHDC is wholly owned by Ironhaven Holdings Inc. ("Holdings"), a Delaware corporation (EIN 84-3291044). Holdings, in turn, is wholly owned by Thornfield Infrastructure Fund III, LP ("Fund III"), a vintage 2021 infrastructure fund with committed capital of approximately $4.8 billion. Fund III is the relevant fund vehicle of Thornfield Capital Partners, LP, an infrastructure-focused private equity sponsor with its principal offices at 800 Park Avenue, 22nd Floor, New York, New York 10021. The complete ownership chain is therefore: Thornfield Capital Partners, LP (general partner) → Thornfield Infrastructure Fund III, LP (fund vehicle) → Ironhaven Holdings Inc. (Delaware C-corporation) → Ironhaven Data Centers LLC (Delaware LLC, disregarded entity or partnership) → Ironhaven Frankfurt GmbH (German GmbH, wholly-owned subsidiary).

For US federal income tax purposes, IHDC is treated as a disregarded entity (subject to confirmation of the entity classification election as discussed in Section XII below). Assuming disregarded entity status, IHDC's income, deductions, gains, losses, and credits are attributed directly to Holdings, which is a Delaware C-corporation and the relevant taxpayer for federal income tax purposes. If IHDC has instead elected to be treated as a partnership for US federal income tax purposes, the analysis of certain issues addressed herein — most notably, the identity of the taxpayer claiming interest deductions and the application of IRC § 163(j) — would differ, and we would provide supplemental analysis accordingly.

Ironhaven Frankfurt GmbH. IHDC Frankfurt is a German Gesellschaft mit beschränkter Haftung (limited liability company) registered at Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany. IHDC Frankfurt is registered with the Amtsgericht (local court) Frankfurt am Main under registration number HRB 129457. Its German tax identification number (Steuernummer) is 045/127/98321, and its EU VAT identification number (Umsatzsteuer-Identifikationsnummer or "USt-IdNr.") is DE347891205. IHDC Frankfurt is wholly owned by IHDC and serves as the operating entity for the Ironhaven data center business in Germany and, more broadly, in the European market.

Operations. IHDC operates hyperscale data-center campuses designed to serve enterprise cloud computing, artificial intelligence workloads, and managed colocation customers. The company currently has two major campus developments in progress:

Virginia Campus — Ironhaven Ashburn I. Located in Loudoun County, Virginia, the Ironhaven Ashburn I campus encompasses approximately 142 acres with planned total power capacity of 120 megawatts ("MW"). Phase I of the Virginia campus provides for 60 MW of capacity at an estimated Phase I development cost of approximately $475,000,000. Loudoun County is the largest data center market in the world, and IHDC has secured long-term power purchase agreements with Northgate Partners LLC for the full 120 MW build-out.

Frankfurt Campus — Ironhaven Frankfurt I. Located in Frankfurt am Main, Germany, the Ironhaven Frankfurt I campus encompasses approximately 18.7 hectares with planned total power capacity of 80 MW. Phase I of the Frankfurt campus provides for 40 MW of capacity at an estimated Phase I development cost of approximately €253,600,000 (approximately $275,000,000 at the current EUR/USD exchange rate of 1.0846). Frankfurt is the primary data center hub in continental Europe, serving as a key interconnection point for major internet exchange traffic.

Key Financial Metrics. Based on the financial information provided by IHDC management, the following key metrics are relevant to our tax analysis:

These metrics are relevant in particular to the debt-equity characterization analysis (Section III), the IRC § 163(j) business interest expense limitation analysis (Section III.C), and the German interest barrier rule (Zinsschranke) analysis (Section IX.C).

B. Term Loan Structure

The Term Loan is a $950,000,000 aggregate commitment Senior Secured Term Loan B facility. The material economic terms of the Facility are summarized below:

Aggregate Commitments. $950,000,000, structured in two tranches:

USD Tranche: $675,000,000 in aggregate principal amount, bearing interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus 425 basis points per annum, with a SOFR floor of 0.50%. The USD Tranche is denominated and payable in US dollars.

EUR Sub-Tranche: €253,571,429 in aggregate principal amount (approximately $275,000,000 at the reference exchange rate of EUR/USD 1.0846), bearing interest at a floating rate equal to the Euro Interbank Offered Rate ("EURIBOR") plus 425 basis points per annum, with a EURIBOR floor of 0.00%. The EUR Sub-Tranche is denominated and payable in euros.

Original Issue discount. The Term Loan is being offered at an issue price of 99.50% of the aggregate face amount, representing an OID of 50 basis points. The aggregate OID is $4,750,000 ($950,000,000 × 0.50%), resulting in net proceeds to the Borrowers of $945,250,000.

Maturity. The Term Loan matures on June 3, 2031 (seven years from the anticipated closing date of June 3, 2024).

Amortization. The Term Loan amortizes at a rate of 1.00% per annum of the original aggregate principal amount, payable in equal quarterly installments. This results in aggregate quarterly amortization payments of $2,375,000, of which €633,928.57 per quarter is allocable to the EUR Sub-Tranche.

Mandatory Prepayment — Excess Cash Flow Sweep. The Credit Agreement requires mandatory prepayment from Excess Cash Flow ("ECF") at the following rates:

• 75% of ECF, stepping down to

• 50% of ECF when the Net Leverage Ratio is equal to or less than 4.5x, and further stepping down to

• 25% of ECF when the Net Leverage Ratio is equal to or less than 3.5x.

Call Protection. Voluntary prepayments during the first six months following closing (through December 3, 2024) are subject to a soft call premium of 101% of the principal amount prepaid (the "Soft Call Premium").

Change of Control. A change of control triggers a mandatory prepayment at 101% of the outstanding principal amount plus accrued and unpaid interest. A "change of control" is defined, in relevant part, as the occurrence of any event pursuant to which Thornfield Infrastructure Fund III, LP (or its affiliates) ceases to hold, directly or indirectly, more than 50% of the voting equity interests of Ironhaven Holdings Inc.

Financial Covenants. The Credit Agreement contains the following financial maintenance covenants:

• Maximum Net Leverage Ratio: 6.00x

• Minimum Interest Coverage Ratio: 2.00x

• Maximum Capital Expenditures: $325,000,000 (fiscal year 2024), $250,000,000 (fiscal year 2025 and each fiscal year thereafter), with a 25% carry-forward of unused amounts to the immediately succeeding fiscal year

Governing Law. The Credit Agreement is governed by the laws of the State of New York. Security documents relating to IHDC Frankfurt's assets located in Germany are governed by German law.

C. The Lender Syndicate

The lender syndicate consists of seven financial institutions and credit funds, as set forth in the table below:

Crescent Harbor Bank, N.A. serves as the Administrative Agent under the Credit Agreement and as the Lead Arranger for the syndication. NordBrücke AG's commitment of $150,000,000 is allocated entirely to the EUR Sub-Tranche.

Non-US Lenders. Two members of the lender syndicate — NordBrücke AG and Osprey Insurance Capital, Ltd. — are non-US entities. Interest payments to these lenders are subject to the US withholding tax analysis set forth in Section V of this memorandum.

Pacific Rim Institutional Lending Corp. Although Pacific Rim is organized as a Delaware corporation (and therefore is a domestic entity for US federal income tax purposes), it is a wholly-owned subsidiary of a Cayman Islands-domiciled collateralized loan obligation ("CLO") vehicle. We note this relationship because, in certain circumstances, the beneficial ownership of interest payments could be attributed to the Cayman parent rather than to the domestic subsidiary. We recommend confirming that Pacific Rim is the beneficial owner and taxpayer of record for purposes of the interest payments it receives under the Term Loan, and that no look-through treatment applies that would cause a non-US person to be treated as the beneficial owner of such interest. Our preliminary view, based on the information available, is that Pacific Rim, as a separate domestic corporate entity, is the appropriate taxpayer. This conclusion is confirmed, subject to the caveats set forth in Section V.D below.

D. Use of Proceeds

The net proceeds of the Term Loan (approximately $945,250,000 after OID) will be applied as follows:

The refinancing of the Greystone Mezzanine Fund II, LP mezzanine notes includes $130,000,000 of outstanding principal plus $2,708,333.33 of accrued payment-in-kind ("PIK") interest as of the anticipated closing date. The tracing of proceeds to specific uses is relevant to the sourcing of interest deductions and to the allocation of financing costs between the US and German operations.

E. Fees

The following fees are payable in connection with the Term Loan:

Arrangement Fee. IHDC will pay an arrangement fee of $14,250,000 to Crescent Harbor Bank, N.A. in its capacity as Lead Arranger, calculated as 1.50% of the aggregate $950,000,000 commitment amount. This fee is payable at closing on June 3, 2024.

Administrative Agent Fee. IHDC will pay an annual administrative agent fee of $175,000 to Crescent Harbor Bank, N.A. in its capacity as Administrative Agent, payable in quarterly installments of $43,750.

Collateral Agent Fee. IHDC will pay an annual collateral agent fee of $200,000 to Pinnacle Trust Company, N.A. in its capacity as Collateral Agent, consisting of $125,000 per annum for domestic collateral agent services and $75,000 per annum for German security trustee (Sicherheitentreuhänder) services. This fee is payable annually in advance.

Ticking Fee. IHDC will pay a ticking fee of $527,778 to the Lenders, calculated as 0.25% per annum on the aggregate $950,000,000 undrawn commitments for the period from March 15, 2024 (the date of the commitment letter) through June 3, 2024 (the closing date), a period of 80 days on a 360-day basis ($950,000,000 × 0.25% × 80/360 = $527,778).

The tax treatment of each fee component is analyzed in Section X of this memorandum.

III. US Federal Income Tax Classification of the Term Loan — Debt vs. Equity

A. General Framework

The threshold question in analyzing the federal income tax consequences of the Term Loan is whether the Facility will be respected as indebtedness for US federal income tax purposes, as distinct from equity. This classification is of fundamental importance because interest paid on indebtedness is generally deductible by the borrower under IRC § 163(a), whereas distributions on equity are not deductible and may be characterized as dividends subject to differing withholding rates.

The Internal Revenue Code does not provide a comprehensive definition of "indebtedness" for purposes of the interest deduction under IRC § 163 or for other purposes. IRC § 385 authorizes the Secretary of the Treasury to prescribe regulations to determine whether an interest in a corporation is to be treated as stock or indebtedness, and it identifies a non-exclusive list of factors to be taken into account, including: (i) whether there is a written unconditional promise to pay on demand or on a specified date a sum certain in money in return for an adequate consideration in money or money's worth, and to pay a fixed rate of interest; (ii) whether there is subordination to or preference over any indebtedness of the corporation; (iii) the ratio of debt to equity of the corporation; (iv) whether there is convertibility into the stock of the corporation; and (v) the relationship between holdings of stock in the corporation and holdings of the interest in question.

The Treasury has promulgated regulations under IRC § 385 (the so-called "documentation regulations" finalized in 2016 and subsequently amended), which address certain related-party transactions. However, these regulations are generally directed at related-party debt instruments and are unlikely to apply to the Term Loan given that the lenders are independent third-party financial institutions and credit funds.

In the absence of comprehensive statutory or regulatory guidance, courts have developed a multi-factor test to determine whether an instrument constitutes debt or equity for federal income tax purposes. The leading formulations of this test are found in Mixon v. United States, 464 F.2d 394 (5th Cir. 1972), and Santa Anita Consolidated, Inc. v. Commissioner, 50 T.C. 536 (1968). No single factor is dispositive; the determination is based on the totality of the circumstances, with the economic substance of the transaction controlling over its form.

The key factors typically analyzed include:

(a) the presence or absence of a fixed maturity date; (b) whether there is a stated interest rate, and whether the rate is fixed or contingent; (c) the existence of an unconditional obligation to repay principal; (d) the right to enforce payments of principal and interest; (e) the degree of subordination to other indebtedness; (f) the ratio of debt to equity (thin capitalization); (g) whether the instrument carries the right to participate in profits or growth; (h) the identity of interest between creditors and equity holders; (i) the adequacy of capitalization; (j) the intent of the parties; and (k) the presence or absence of a business purpose for the debt.

B. Application to the Term Loan

We analyze each relevant factor as applied to the Term Loan below.

Fixed Maturity Date. The Term Loan has a fixed maturity date of June 3, 2031, precisely seven years from the closing date. A fixed maturity date is a hallmark of indebtedness and strongly supports debt classification. The maturity date is not contingent on any future event (other than acceleration upon default), and the Borrowers are unconditionally required to repay all outstanding principal on or before such date.

Stated Interest Rate. The Term Loan bears interest at a floating rate of SOFR plus 425 basis points (USD Tranche) and EURIBOR plus 425 basis points (EUR Sub-Tranche). While the rate is floating rather than fixed, the spread of 425 basis points over the reference rate is fixed and represents an arm's-length market rate for a senior secured Term Loan B credit facility in the data center infrastructure sector, based on comparable market transactions reviewed by the Calderwood & Harkness Banking & Finance group. The existence of a stated, market-rate interest obligation strongly supports debt classification. The interest rate is not contingent on or measured by the Borrower's profits, revenues, or other equity-like metrics.

Mandatory Amortization. The Term Loan requires mandatory amortization of 1.00% per annum of the original principal amount, payable in equal quarterly installments. Mandatory amortization is a structural feature commonly associated with debt instruments and further supports debt treatment.

Unconditional Obligation to Repay. The Credit Agreement contains an unconditional and absolute obligation on the part of the Borrowers to repay all outstanding principal, accrued interest, fees, and other amounts due under the Facility. The Lenders have the contractual right to enforce payment through the exercise of remedies, including acceleration of the Term Loan upon an Event of Default and foreclosure on pledged collateral. This factor strongly supports debt classification.

No Equity Participation or Conversion Features. The Term Loan does not include any equity participation rights, conversion features, warrants, or any mechanism pursuant to which the Lenders would share in the profits, growth, or equity appreciation of the Borrowers or any member of the Ironhaven group. The Lenders' return is limited to the stated interest, fees, and OID, which is a characteristic of debt, not equity.

Identity Between Creditors and Equity Holders. The seven members of the lender syndicate are independent third-party financial institutions and credit funds. None of the Lenders holds any equity interest in IHDC, Holdings, IHDC Frankfurt, Thornfield Infrastructure Fund III, LP, or Thornfield Capital Partners, LP. There is no overlap, direct or indirect, between the Lenders and the equity holders of the Borrower. This factor strongly supports debt classification and is one of the most significant indicators that the Term Loan represents true arm's-length indebtedness.

Debt-to-Equity Ratio and Adequacy of Capitalization. The pro forma Net Leverage Ratio at closing is 5.35x, calculated as pro forma Net Total Debt of $887,500,000 divided by Adjusted EBITDA of $165,800,000. While a 5.35x leverage ratio is significant, it is within the market range for sponsor-backed infrastructure credits, and particularly for data center businesses, which generate stable, contracted cash flows and benefit from long-term customer arrangements. The covenant structure includes a Maximum Net Leverage Ratio of 6.00x, which provides cushion relative to the pro forma leverage at closing.

Moreover, Thornfield Infrastructure Fund III, LP has contributed equity of $410,000,000 to Holdings, which represents substantial capitalization of the business. The equity contribution provides a meaningful equity cushion below the debt and supports a finding of adequate capitalization.

Business Purpose. The proceeds of the Term Loan are being used for bona fide business purposes, including the construction of two hyperscale data center campuses, refinancing of existing mezzanine indebtedness, and working capital. There is no indication that the Term Loan is being used to effect a tax-motivated distribution to equity or to achieve any purpose that would undermine debt classification.

Conclusion. Based on the foregoing analysis, we conclude that there is a strong basis to treat the Term Loan as indebtedness for US federal income tax purposes. The totality of the circumstances — including the fixed maturity date, stated market-rate interest, mandatory amortization, unconditional repayment obligation, absence of equity features, independent arm's-length lender syndicate, adequate capitalization, and bona fide business purpose — overwhelmingly supports debt classification. Accordingly, interest expense on the Term Loan should be deductible by the Borrower (through Holdings as the relevant taxpayer, assuming IHDC's disregarded entity status is confirmed) under IRC § 163(a), subject to the limitations discussed immediately below.

C. IRC § 163(j) Business Interest Expense Limitation

Even where an instrument is properly classified as indebtedness, the deduction for business interest expense may be subject to the limitation imposed by IRC § 163(j), as amended by the Tax Cuts and Jobs Act of 2017 ("TCJA") and further modified by subsequent legislation.

General Rule. Under IRC § 163(j)(1), the deduction for business interest expense for any taxable year is limited to the sum of:

(i) the taxpayer's business interest income for such taxable year; (ii) 30% of the taxpayer's adjusted taxable income ("ATI") for such taxable year; and (iii) the taxpayer's floor plan financing interest expense for such taxable year (not applicable here).

For taxable years beginning after December 31, 2021, ATI is calculated without adding back depreciation, amortization, or depletion (reverting to the pre-TCJA approach after the temporary TCJA provision allowing such addbacks expired). This narrower definition of ATI may significantly reduce the amount of deductible interest expense relative to earlier years.

Application to IHDC / Holdings. Based on the financial metrics provided by IHDC management, IHDC (through Holdings) is expected to generate substantial EBITDA. The last-twelve-months Adjusted EBITDA as of March 31, 2024 is $165,800,000. However, ATI for purposes of § 163(j) differs from Adjusted EBITDA in several respects, including the exclusion of addbacks for depreciation, amortization, and depletion (for taxable years beginning after December 31, 2021). For purposes of our preliminary analysis, we assume ATI approximates Adjusted EBITDA, recognizing that the actual ATI figure may be lower once depreciation and amortization are factored in.

Estimated Interest Expense. Based on an assumed SOFR rate of approximately 5.30% as of April 2024, the estimated annual interest expense on the USD Tranche is approximately $64,500,000 ($675,000,000 × 9.55%), and the estimated annual interest expense on the EUR Sub-Tranche (converted to US dollars) is approximately $22,500,000 (€253,571,429 × 8.18% × 1.0846), for a total estimated annual interest expense of approximately $87,000,000 (see Appendix D for detailed calculations). When combined with ticking fee, arrangement fee amortization, and other financing costs that may be characterized as interest equivalents, the total annual interest expense subject to the § 163(j) limitation may approximate $90,700,000.

30% of ATI. Assuming ATI of approximately $165,800,000, the 30% limitation would yield a maximum deductible amount of approximately $49,740,000 (plus any business interest income). This suggests that a significant portion of the estimated $90,700,000 in annual interest expense — potentially in excess of $40,000,000 — would be disallowed in the first year, subject to indefinite carryforward under IRC § 163(j)(2).

We emphasize that this is a preliminary estimate. The actual § 163(j) limitation will depend on the taxpayer's realized ATI in each taxable year, including the impact of depreciation and amortization deductions attributable to the data center assets being placed in service, business interest income (if any), and other items.

Real Property Trade or Business Election — IRC § 163(j)(7)(B). A potentially significant planning opportunity exists under IRC § 163(j)(7)(B), which provides that a taxpayer engaged in a "real property trade or business" (as defined in IRC § 469(c)(7)(C)) may elect to be exempt from the § 163(j) limitation. If such an election is made, all business interest expense of the electing trade or business is fully deductible without regard to the 30% ATI limitation.

However, the election comes with an important trade-off: an electing real property trade or business must use the Alternative Depreciation System ("ADS") under IRC § 168(g) to depreciate its nonresidential real property, residential rental property, and qualified improvement property. Under ADS, nonresidential real property is depreciated over 40 years (versus 39 years under MACRS), and certain properties lose eligibility for bonus depreciation under IRC § 168(k). Given the substantial capital expenditures planned for the Virginia and Frankfurt campuses, the loss of bonus depreciation could result in significant timing differences in depreciation deductions.

Whether IHDC qualifies as a "real property trade or business" for purposes of this election requires further analysis, including consideration of whether data center operations constitute a "real property trade or business" within the meaning of § 469(c)(7)(C). While data center operators typically own and operate real property, the characterization may depend on the specific nature of the services provided (e.g., the degree to which IHDC provides "services" to its customers rather than merely leasing space).

Recommendation. We recommend that IHDC engage in detailed multi-year modeling of the § 163(j) limitation, incorporating projected ATI (taking into account depreciation and amortization), projected interest expense, and the interaction with other tax attributes. The model should include a comparison of the after-tax results with and without the § 163(j)(7)(B) real property trade or business election, factoring in the loss of bonus depreciation under ADS. The timing of the election (which is irrevocable) should be carefully evaluated in consultation with IHDC's financial advisors.

IV. OID Analysis

A. Treatment of the 50 bps discount

The Term Loan is being issued at 99.50% of face value, resulting in aggregate OID of $4,750,000 ($950,000,000 face amount minus $945,250,000 net proceeds). The tax treatment of this discount is governed by IRC §§ 1271 through 1275.

General OID Rules. Under IRC § 1272, if a debt instrument is issued with OID, the holder must include the OID in gross income over the life of the instrument using the constant-yield method, regardless of the holder's overall method of tax accounting. Correspondingly, the issuer (here, the Borrower) accrues a deduction for the OID over the same period as additional interest expense.

De Minimis OID Rule. However, under IRC § 1273(a)(3) and Treasury Regulation § 1.1273-1(d), OID is treated as "de minimis" if it is less than 0.25% of the stated redemption price at maturity multiplied by the number of complete years from the date of issue to the maturity date. If OID is de minimis, it is not subject to the constant-yield accrual rules, and instead is generally recognized by the holder (and deducted by the issuer) only upon retirement (or proportionally upon partial repayment) of the instrument.

The de minimis threshold for the Term Loan is calculated as follows:

0.25% × 7 (complete years to maturity) × $950,000,000 = $16,625,000

The actual OID of $4,750,000 is substantially below the de minimis threshold of $16,625,000. Accordingly, the OID on the Term Loan qualifies as de minimis OID, and neither the Lenders nor the Borrower is required to accrue the OID under the constant-yield method. Instead, the OID will generally be recognized only upon repayment of the Term Loan (at maturity or upon prepayment).

Acceleration Upon Prepayment. Notwithstanding the de minimis treatment, if the Term Loan is prepaid (whether through voluntary prepayment, mandatory ECF sweep, or change-of-control mandatory prepayment), the de minimis OID allocable to the prepaid portion of the principal becomes recognizable at the time of such prepayment. This interaction is analyzed further in Section XI below.

Interaction with Soft Call Premium. If the Borrower exercises the soft call right and prepays all or a portion of the Term Loan at 101% during the first six months following closing (through December 3, 2024), the 1% call premium paid to the Lenders constitutes additional amounts received by the Lenders in connection with the retirement of the debt instrument. The treatment of such premium — as capital gain, ordinary income, or additional interest — depends on whether the Term Loan constitutes a "bond" for purposes of IRC § 1271 and on the application of the market discount rules under IRC §§ 1276–1278. For the Borrower, the call premium should be deductible as additional interest expense in the year of prepayment.

B. Treatment of Arrangement Fee and Upfront Fee

Arrangement Fee ($14,250,000). The arrangement fee paid by IHDC to Crescent Harbor Bank, N.A. in its capacity as Lead Arranger is a cost of obtaining the financing and should be treated as a debt issuance cost for US federal income tax purposes. Under IRC § 461 and the capitalization rules of IRC § 263, debt issuance costs are required to be capitalized and amortized over the term of the debt instrument to which they relate. Accordingly, the $14,250,000 arrangement fee should be amortized on a straight-line basis over the seven-year term of the Term Loan, resulting in approximately $2,035,714 of annual amortization expense. For financial accounting purposes, the treatment is consistent under ASC 835-30 (Interest — Imputation of Interest).

OID / Upfront Fee ($4,750,000). As discussed above, the aggregate OID of $4,750,000 is de minimis and will be recognized upon repayment of the Term Loan rather than accrued over its term.

Ticking Fee ($527,778). The ticking fee is payable in respect of the period during which the commitments were outstanding but undrawn (March 15, 2024 through June 3, 2024). The ticking fee is generally treated as a deductible commitment fee or financing expense for US federal income tax purposes and is deductible by the Borrower in the taxable year paid or accrued. The fee constitutes ordinary income to the Lenders. We note that the ticking fee may be characterized as an interest equivalent for purposes of the IRC § 163(j) limitation, which would reduce the amount of other business interest expense that may be deducted in the relevant taxable year.

V. Withholding Tax Analysis — Non-US Lenders

A. General Framework — IRC §§ 871(a) and 881(a)

Under the general rules of IRC § 871(a) (applicable to nonresident alien individuals) and IRC § 881(a) (applicable to foreign corporations), a 30% US federal withholding tax is imposed on the gross amount of certain categories of US-source income — including interest — paid to non-US persons, unless such withholding is reduced or eliminated by an applicable income tax treaty or a statutory exemption.

For purposes of these withholding rules, "interest" includes stated interest, OID, and, in certain circumstances, fees or other amounts that are recharacterized as interest. Interest is US-source if paid by a US person (or, more precisely, if paid by a "domestic corporation" or by any "resident" of the United States). See IRC § 861(a)(1). The source-of-income analysis is relevant to the EUR Sub-Tranche and is discussed in Section V.B below.

The person paying the interest (or any intermediary acting as paying agent) is responsible for withholding the applicable tax and remitting it to the Internal Revenue Service. In this case, IHDC (or Holdings, as the relevant taxpayer if IHDC is a disregarded entity) is the withholding agent. The Credit Agreement designates Crescent Harbor Bank, N.A. as the Administrative Agent and paying agent, and Crescent Harbor may have co-withholding responsibilities as the entity that physically disburses interest payments to the Lenders. The allocation of withholding responsibilities between IHDC and Crescent Harbor should be confirmed in the Credit Agreement's tax provisions.

Portfolio Interest Exemption — IRC § 871(h) / § 881(c). The principal statutory exemption from withholding on interest paid to non-US persons is the "portfolio interest" exemption under IRC § 871(h) (for nonresident alien individuals) and IRC § 881(c) (for foreign corporations). The portfolio interest exemption eliminates withholding on US-source interest if the following conditions are satisfied:

(i) The interest is not effectively connected with the conduct of a trade or business within the United States by the recipient;

(ii) The recipient provides the withholding agent with a valid IRS Form W-8BEN (for individuals) or W-8BEN-E (for entities) certifying its foreign status;

(iii) The obligation on which the interest is paid is in "registered form" within the meaning of IRC § 163(f) and Treasury Regulation § 5f.103-1; and

(iv) The recipient is not (a) a "10-percent shareholder" of the borrower within the meaning of IRC § 871(h)(3)(B) or § 881(c)(3)(B), (b) a "controlled foreign corporation" that is related to the borrower within the meaning of IRC § 881(c)(3)(C), or (c) a "bank" receiving interest described in IRC § 881(c)(3)(A) — i.e., interest received on a loan made in the ordinary course of its banking business.

The "bank" exception in IRC § 881(c)(3)(A) is of particular importance to this analysis because it precludes banks (including BaFin-regulated credit institutions such as NordBrücke AG) from claiming the portfolio interest exemption. This exception is discussed in detail in Section V.B below.

B. NordBrücke AG (German Aktiengesellschaft)

Entity Profile. NordBrücke AG is a German Aktiengesellschaft (stock corporation), regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht ("BaFin") as a credit institution (Kreditinstitut) under the German Banking Act (Kreditwesengesetz, "KWG"). NordBrücke AG is headquartered at Neue Mainzer Straße 72, 60311 Frankfurt am Main, Germany. NordBrücke's commitment of $150,000,000 is allocated entirely to the EUR Sub-Tranche.

The key contact at NordBrücke AG for tax documentation purposes is Dr. Stefan Kleinhans.

Portfolio Interest Exemption — Not Available. As a BaFin-regulated credit institution, NordBrücke AG is a "bank" within the meaning of IRC § 881(c)(3)(A). The statute provides that the portfolio interest exemption does not apply to interest received by a foreign corporation that is a bank on a loan entered into in the ordinary course of its banking business. Because NordBrücke AG is making its commitment under the EUR Sub-Tranche as part of its ordinary course banking and institutional lending activities, the bank exception from the portfolio interest exemption squarely applies. Accordingly, NordBrücke AG cannot rely on the portfolio interest exemption to avoid US withholding tax, and an alternative basis for exemption must be identified.

Treaty Analysis — US-Germany Income Tax Treaty. The United States and the Federal Republic of Germany are parties to the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, signed on August 29, 1989, as amended by the Protocol signed on June 1, 2006 (the "US-Germany Treaty").

Article 11 (Interest). Article 11(1) of the US-Germany Treaty provides that interest arising in a Contracting State (here, the United States) and paid to a resident of the other Contracting State (here, Germany) shall be taxable only in the state of residence of the beneficial owner. Article 11(1) provides that if the beneficial owner of the interest is a resident of Germany, the United States shall impose no withholding tax on such interest — i.e., the treaty provides a 0% withholding rate on interest paid to a German resident that is the beneficial owner of such interest.

For purposes of Article 11, "interest" is defined broadly to include income from debt-claims of every kind, whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds, or debentures. The definition encompasses interest on the EUR Sub-Tranche.

Limitation on Benefits — Article 28. The benefits of the US-Germany Treaty are subject to the Limitation on Benefits ("LOB") provisions of Article 28. Under Article 28, a resident of a Contracting State is entitled to treaty benefits only if such resident qualifies under one or more of the enumerated tests. NordBrücke AG is expected to satisfy the LOB requirements through one or more of the following bases:

(a) Publicly traded company test (Article 28(2)(c)): If NordBrücke AG's principal class of shares is regularly traded on a recognized stock exchange, it satisfies this test. We understand from publicly available information that NordBrücke AG's shares may be listed on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse), although this should be confirmed.

(b) Active trade or business test (Article 28(4)): NordBrücke AG is actively engaged in the banking business in Germany through its BaFin-regulated operations, and the interest income it derives from the EUR Sub-Tranche is connected to this active trade or business. This test requires that the income be derived in connection with, or be incidental to, the active conduct of a trade or business in the residence state.

NordBrücke AG should certify its LOB qualification on Part III of IRS Form W-8BEN-E.

Withholding Documentation. To claim the treaty benefit, NordBrücke AG must provide IHDC (or its withholding agent) with a properly completed and executed IRS Form W-8BEN-E, which must include:

• Certification of foreign status and identification of NordBrücke AG as a corporation resident in Germany;

• A claim of treaty benefits under the US-Germany Treaty, Article 11 (Interest), specifying the 0% withholding rate;

• LOB certification under Part III of the form;

• NordBrücke AG's Global Intermediary Identification Number ("GIIN") for FATCA purposes; and

• Any other information required by the form's instructions.

Source-of-Income Analysis for EUR Sub-Tranche. An important collateral issue arises with respect to the source of the interest payments on the EUR Sub-Tranche. Under IRC § 861(a)(1), interest paid by a "domestic corporation" is generally treated as US-source income. However, if the primary obligor on the EUR Sub-Tranche is IHDC Frankfurt (a German GmbH), rather than IHDC (a US entity), the interest may be treated as foreign-source income under the same provision (or under general source-of-income principles), since interest paid by a foreign corporation is generally treated as foreign-source income.

The structure of the Credit Agreement must be examined to determine whether IHDC Frankfurt is the primary obligor on the EUR Sub-Tranche or whether IHDC (the US entity) is the borrower with IHDC Frankfurt acting as a co-borrower or guarantor. If IHDC Frankfurt is the primary obligor and is treated as the payer of interest on the EUR Sub-Tranche for US federal income tax purposes, then the interest would be foreign-source, and no US withholding tax would apply regardless of the availability of the US-Germany Treaty. This analysis would make the treaty benefit analysis with respect to NordBrücke AG moot as to the EUR Sub-Tranche (though the treaty would remain relevant as a backstop).

We recommend that the Credit Agreement be reviewed to confirm the allocation of borrower obligations between IHDC and IHDC Frankfurt with respect to each tranche, and that the source-of-income analysis be finalized in coordination with Daniel Obi and Lisa Morrow.

Conclusion. Interest paid to NordBrücke AG on the EUR Sub-Tranche should be exempt from US withholding tax under Article 11 of the US-Germany Treaty, provided that NordBrücke AG delivers a valid IRS Form W-8BEN-E claiming the treaty benefit and satisfying the LOB requirements. In addition, to the extent IHDC Frankfurt (rather than IHDC) is treated as the primary obligor on the EUR Sub-Tranche, the interest may be treated as foreign-source, eliminating the need for US withholding regardless of treaty benefits.

C. Osprey Insurance Capital, Ltd. (Bermuda Exempted Company)

Entity Profile. Osprey Insurance Capital, Ltd. is a Bermuda exempted company with its registered office at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. Osprey's commitment under the Term Loan is $75,000,000, allocated to the USD Tranche. Osprey is an insurance company that makes credit investments as part of its investment portfolio management activities.

The key contact at Osprey for tax documentation purposes is Fiona Abernathy, Head of Credit Investments.

Portfolio Interest Exemption — Available (Subject to Confirmation). Unlike NordBrücke AG, Osprey Insurance Capital, Ltd. is not a "bank" within the meaning of IRC § 881(c)(3)(A). Osprey is an insurance company, and its lending activities under the Term Loan are investment activities rather than banking activities conducted in the ordinary course of a banking business. Accordingly, the bank exception from the portfolio interest exemption does not apply to Osprey.

The remaining conditions for the portfolio interest exemption must be satisfied:

(i) Not effectively connected income: Osprey is a Bermuda company and, to our knowledge, does not conduct a trade or business within the United States. Accordingly, the interest received on the Term Loan is not effectively connected with a US trade or business.

(ii) Valid IRS Form W-8BEN-E: Osprey must provide a valid IRS Form W-8BEN-E certifying its foreign status and claiming the portfolio interest exemption. The form must be delivered to IHDC (or its withholding agent) prior to the first payment of interest.

(iii) Registered form: The Term Loan must be in "registered form" within the meaning of IRC § 163(f) and Treasury Regulation § 5f.103-1. We have confirmed that the Credit Agreement provides for the Term Loan to be in registered form — the Administrative Agent maintains a register of Lenders, and interests in the Term Loan are not transferable in bearer form. This requirement is satisfied.

(iv) Not a 10% shareholder: Based on our understanding, Osprey does not hold, directly or indirectly, 10% or more of the total combined voting power of all classes of stock of Ironhaven Holdings Inc. (or, if IHDC is a partnership, 10% or more of the capital or profits interests in IHDC). This condition appears to be satisfied, but should be confirmed.

(v) Not a related CFC: Based on our understanding, Osprey is not a controlled foreign corporation related to IHDC within the meaning of IRC § 881(c)(3)(C). This condition appears to be satisfied, but should be confirmed.

Treaty Analysis — US-Bermuda. There is no income tax treaty between the United States and Bermuda. Bermuda does not impose income tax on its residents, and there is no bilateral agreement that would reduce or eliminate US withholding tax on interest. Accordingly, Osprey cannot rely on a treaty to reduce US withholding, and the portfolio interest exemption is the primary (and sole viable) path to exemption from the 30% statutory withholding rate.

UK-Person Nexus. We note that Fiona Abernathy and certain other key personnel of Osprey have UK-person nexus. While this does not have a direct US tax implication for the withholding analysis, we observe that if Osprey were treated as a UK tax resident for purposes of the US-UK Income Tax Treaty, Article 11 of that treaty could provide a 0% withholding rate on interest. However, Osprey is incorporated in Bermuda and, based on available information, is not a UK tax resident for treaty purposes. We do not rely on the US-UK Treaty in our analysis and instead recommend reliance on the portfolio interest exemption as the primary basis for exemption.

FATCA Considerations. As a Bermuda entity, Osprey's FATCA compliance status is analyzed separately in Section VI.C below. In brief, Bermuda has entered into a Model 1 IGA with the United States, and Osprey must be registered with the IRS and obtain a GIIN (or qualify as an exempt beneficial owner or deemed-compliant FFI) to avoid FATCA withholding. Osprey must provide its GIIN and certify its FATCA status on the Form W-8BEN-E.

Risk Factor. If Osprey fails to deliver a valid Form W-8BEN-E or ceases to qualify for the portfolio interest exemption (for example, if it acquires a 10% shareholder interest in Holdings or fails to maintain its FATCA compliance), IHDC would be required to withhold 30% on all interest payments to Osprey. In such event, the Credit Agreement's tax gross-up provisions (analyzed in Section VII) would require IHDC to gross up payments — but only if the resulting withholding tax constitutes an "Indemnified Tax" and not an "Excluded Tax." If the withholding is attributable to Osprey's failure to deliver required tax forms, it would constitute an Excluded Tax, and Osprey would bear the economic cost of the withholding.

Conclusion. Interest paid to Osprey Insurance Capital, Ltd. should be exempt from US withholding tax under the portfolio interest exemption of IRC § 881(c), subject to the delivery of a valid IRS Form W-8BEN-E certifying Osprey's foreign status, claiming the portfolio interest exemption, and providing FATCA compliance certification (including its GIIN). We recommend confirming the factual predicates for the exemption — namely, that Osprey is not a 10% shareholder and is not a related CFC — prior to closing.

D. Pacific Rim Institutional Lending Corp. — Look-Through Considerations

Pacific Rim Institutional Lending Corp. is a Delaware corporation with its principal office in San Francisco, California. As a US domestic corporation, Pacific Rim is not subject to withholding tax on US-source interest payments it receives under the Term Loan. Pacific Rim provides an IRS Form W-9 to the withholding agent, and no withholding applies.

However, Pacific Rim is a wholly-owned subsidiary of a Cayman Islands-domiciled CLO vehicle. We flag this relationship because, in certain limited circumstances, the Internal Revenue Service or the applicable withholding agent may look through a domestic entity to its foreign parent for purposes of determining the beneficial owner of interest payments. In particular, if the domestic entity is disregarded for US federal tax purposes (e.g., as a single-member LLC treated as a disregarded entity), or if the structure is otherwise collapsed under anti-abuse or economic substance principles, the Cayman parent could be treated as the beneficial owner of the interest income, potentially triggering withholding obligations.

Based on the information available, Pacific Rim Institutional Lending Corp. is organized as a corporation (not as an LLC or other entity that could be a disregarded entity), and we expect that it has made or will be treated as having made the default classification election as a corporation under the check-the-box regulations (Treasury Regulation § 301.7701-3). As a separate corporate entity, Pacific Rim is the beneficial owner and taxpayer of record with respect to interest payments it receives.

Conclusion. No US withholding tax applies to interest payments made to Pacific Rim Institutional Lending Corp. as a domestic corporation. We recommend confirming Pacific Rim's entity classification and beneficial ownership status prior to closing, but do not anticipate any issues.

E. Form W-8BEN-E Collection and Compliance

Each non-US Lender is required to provide a properly completed and executed IRS Form W-8BEN-E to the withholding agent (IHDC and/or Crescent Harbor Bank, N.A. as Administrative Agent) prior to the first payment to which the form relates. In practice, forms should be collected prior to funding on June 3, 2024.

The following forms are required:

Expiration and Renewal. Under Treasury Regulation § 1.1441-1(e)(4)(ii), a Form W-8BEN-E generally remains valid through the last day of the third calendar year following the year in which the form is signed, unless a change in circumstances makes any information on the form incorrect (in which case the form becomes invalid and must be replaced within 30 days of the change in circumstances). For a form signed in 2024, the expiration date would be December 31, 2027.

Given that the Term Loan matures on June 3, 2031, at least one renewal cycle for each W-8BEN-E will be required during the life of the Facility. We strongly recommend that IHDC and/or the Administrative Agent establish a tracking system for W-8BEN-E expiration dates and initiate renewal requests to each non-US Lender no fewer than 60 days prior to expiration.

Calderwood & Harkness has prepared a transmittal package with instructions for the completion of the required W-8BEN-E forms. This package was circulated to NordBrücke AG and Osprey Insurance Capital, Ltd. under separate cover on April 22, 2024 (see separate W-8BEN-E Transmittal Memorandum).

VI. FATCA (Foreign Account Tax Compliance Act) — IRC §§ 1471–1474

A. General Framework

The Foreign Account Tax Compliance Act ("FATCA"), enacted as part of the Hiring Incentives to Restore Employment Act of 2010, added IRC §§ 1471 through 1474 to the Internal Revenue Code. FATCA imposes a 30% withholding tax on certain "withholdable payments" — including US-source interest — made to "foreign financial institutions" ("FFIs") and "non-financial foreign entities" ("NFFEs") that do not comply with FATCA's reporting and due diligence requirements or that do not qualify for an applicable exemption.

The FATCA withholding obligation is separate from, and in addition to, the withholding obligations under IRC §§ 871 and 881 discussed in Section V above. Even if a non-US Lender is exempt from withholding under a treaty or the portfolio interest exemption, FATCA withholding may apply independently if the Lender fails to comply with FATCA requirements.

The United States has entered into Intergovernmental Agreements ("IGAs") with numerous jurisdictions to facilitate FATCA compliance. Under a Model 1 IGA, financial institutions in the partner jurisdiction report account information to their local tax authority (rather than directly to the IRS), and the local tax authority exchanges the information with the IRS. FFIs in Model 1 IGA jurisdictions are generally treated as "deemed compliant" provided they comply with local implementing legislation.

B. NordBrücke AG — FATCA Analysis

Germany has entered into a Model 1 IGA with the United States, effective as of July 31, 2014. Under this IGA, German financial institutions that comply with the reporting requirements of the German implementing legislation (the FATCA-USA-Umsetzungsverordnung) are treated as "Reporting Model 1 FFIs" and are deemed compliant with FATCA.

NordBrücke AG, as a BaFin-regulated credit institution, is classified as a "Reporting Model 1 FFI" under the Germany-US IGA. Provided that NordBrücke AG complies with its reporting obligations under German law and provides its GIIN on its IRS Form W-8BEN-E, no FATCA withholding should apply to interest payments made to NordBrücke AG under the EUR Sub-Tranche.

We recommend confirming NordBrücke AG's GIIN upon receipt of its Form W-8BEN-E by verifying the GIIN against the IRS FFI List maintained on the IRS website.

C. Osprey Insurance Capital, Ltd. — FATCA Analysis

Bermuda has entered into a Model 1 IGA with the United States, effective as of December 19, 2013. Under this IGA, Bermuda financial institutions that comply with the reporting requirements of Bermuda's implementing legislation are treated as "Reporting Model 1 FFIs" and are deemed compliant with FATCA.

As a Bermuda exempted company engaged in insurance and credit investment activities, Osprey Insurance Capital, Ltd. may be classified as either a "Financial Institution" (if it is an "Investment Entity" as defined under the IGA) or as a "Non-Financial Foreign Entity." The correct classification depends on the nature and scope of Osprey's business activities:

• If Osprey primarily conducts insurance activities (underwriting and risk assumption), it may be classified as a "Specified Insurance Company" under the IGA, which is a category of Financial Institution.

• If Osprey primarily manages and invests assets (including credit investments such as the Term Loan), it may be classified as an "Investment Entity," which is also a category of Financial Institution under the IGA.

• In either case, as a Financial Institution in a Model 1 IGA jurisdiction, Osprey must register with the IRS and obtain a GIIN, or qualify as an "exempt beneficial owner" or "deemed-compliant FFI" under the IGA.

Osprey must certify its FATCA status on Part I of its IRS Form W-8BEN-E and provide its GIIN (if required to obtain one). If Osprey is properly classified and provides a valid GIIN, no FATCA withholding should apply.

Risk. If Osprey fails to register with the IRS, fails to obtain or maintain a GIIN, or otherwise fails to comply with FATCA requirements, IHDC would be required to impose 30% FATCA withholding on all interest payments to Osprey. In such event, the Credit Agreement's tax gross-up provisions would need to be analyzed to determine whether FATCA withholding attributable to Osprey's noncompliance constitutes an "Excluded Tax" (as we expect it would, based on the standard market formulation discussed in Section VII below). If FATCA withholding is an Excluded Tax, IHDC would not be required to gross up such payments, and Osprey would bear the economic cost.

D. Domestic Lenders — FATCA

The five US-domiciled Lenders — Crescent Harbor Bank, N.A., Ridgeline National Bank, Marlowe Asset Management Meridian Capital, LLC, Atlas Peak Credit Partners, LP, and Pacific Rim Institutional Lending Corp. — are domestic entities and provide IRS Forms W-9 certifying their US status. FATCA withholding does not apply to payments made to domestic entities. No further FATCA analysis is required with respect to these Lenders.

VII. Tax Gross-Up and Indemnity Provisions of the Credit Agreement

The Credit Agreement contains standard tax gross-up and indemnity provisions that allocate the economic risk of withholding taxes between the Borrower and the Lenders. These provisions are typical for institutional syndicated credit facilities and are generally consistent with the Loan Syndications and Trading Association ("LSTA") model provisions.

Indemnified Taxes. The Credit Agreement defines "Indemnified Taxes" to include all present or future taxes required to be deducted or withheld fro

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 125 Broad Street New York, NY 10004
MEMORANDUM
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I. Executive Summary
This memorandum sets forth our analysis of the material United States federal income tax, Delaware, Virginia, and Federal Republic of Germany tax implications arising from the proposed $950,000,000 Senior Secured Term Loan B facility (the "Term Loan" or "Facility") to be entered into by Ironhaven Data Centers LLC ("IHDC" or the "Borrower"), a Delaware limited liability company, and Ironhaven Frankfurt GmbH ("IHDC Frankfurt" or the "Co-Borrower"), a German limited liability company (Gesellschaft mit beschränkter Haftung), as co-borrowers.
IHDC is a Delaware limited liability company that, for United States federal income tax purposes, is treated as a disregarded entity (or, alternatively, as a partnership — entity classification election status should be confirmed as set forth in our recommendations below). If IHDC is properly treated as a disregarded entity, its sole member, Ironhaven Holdings Inc., a Delaware corporation ("Holdings"), is the relevant taxpayer for US federal income tax purposes with respect to income, deductions, and obligations attributable to IHDC. IHDC Frankfurt is a German GmbH, wholly owned by IHDC, and is a separate taxable entity under both US and German tax law.
The Term Loan is structured as a two-tranche senior secured credit facility consisting of: (i) a US dollar-denominated tranche in the aggregate principal amount of $675,000,000 (the "USD Tranche"), bearing interest at a rate of SOFR plus 425 basis points (with a SOFR floor of 0.50%); and (ii) a euro-denominated sub-tranche in the aggregate principal amount of €253,571,429 (approximately $275,000,000 at an exchange rate of EUR/USD 1.0846) (the "EUR Sub-Tranche"), bearing interest at a rate of EURIBOR plus 425 basis points (with a EURIBOR floor of 0.00%). The Term Loan is being offered at an original issue discount ("OID") of 50 basis points (issue price of 99.50), resulting in net proceeds to the Borrowers of approximately $945,250,000. The Term Loan matures on June 3, 2031, seven years from the anticipated closing date of June 3, 2024.
The lender syndicate comprises seven lenders, including two non-US entities: NordBrücke AG, a German Aktiengesellschaft regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht ("BaFin") with its principal offices in Frankfurt am Main, and Osprey Insurance Capital, Ltd., a Bermuda exempted company with its registered office in Hamilton, Bermuda. The presence of these non-US lenders gives rise to important US withholding tax and FATCA compliance considerations that are addressed in detail in Sections V and VI of this memorandum.
Our principal tax conclusions are as follows:
1. Debt Classification. The Term Loan should be respected as indebtedness for US federal income tax purposes under the multi-factor debt-equity analysis. The terms of the Facility — including a fixed maturity date, market-rate stated interest, mandatory amortization, unconditional obligation to repay, arm's-length lending terms, and the absence of equity participation features — support debt treatment. Accordingly, interest expense on the Term Loan should be deductible by the Borrower (through Holdings as the relevant taxpayer) under IRC § 163, subject to the limitations discussed in Section III.C below.
2. OID Treatment. The 50 basis point discount gives rise to aggregate OID of $4,750,000. Because this amount falls below the de minimis OID threshold of $16,625,000 (calculated as 0.25% × 7 years × $950,000,000), the OID may be treated as de minimis and recognized upon repayment rather than accrued over the life of the Term Loan using the constant-yield method. However, prepayment events may accelerate recognition of de minimis OID.
3. Withholding Tax — Non-US Lenders. Interest payments to NordBrücke AG and Osprey Insurance Capital, Ltd. are subject to the 30% statutory US withholding tax under IRC §§ 871(a) and 881(a), unless reduced or eliminated by an applicable treaty or statutory exemption. For NordBrücke AG, the US-Germany Income Tax Treaty (as amended by the 2006 Protocol) provides a 0% withholding rate on interest under Article 11, subject to Limitation on Benefits ("LOB") qualification and delivery of a valid IRS Form W-8BEN-E. For Osprey Insurance Capital, Ltd., the portfolio interest exemption under IRC § 881(c) should be available (since Osprey is not a "bank" within the meaning of § 881(c)(3)(A) and, based on our understanding, is not a 10% shareholder or a related controlled foreign corporation), subject to delivery of a valid IRS Form W-8BEN-E and confirmation that the Term Loan is in "registered form."
4. FATCA Compliance. Both NordBrücke AG and Osprey Insurance Capital, Ltd. are located in jurisdictions that have entered into Model 1 Intergovernmental Agreements ("IGAs") with the United States. Provided each entity complies with its applicable IGA reporting obligations and provides a valid Global Intermediary Identification Number ("GIIN") on its Form W-8BEN-E, no FATCA withholding should apply.
5. German Trade Tax (Gewerbesteuer) Interest Deduction Limitations. IHDC Frankfurt is subject to the Hinzurechnung (add-back) rule under § 8 Nr. 1 GewStG, which requires 25% of all interest expense (subject to a €200,000 annual exemption) to be added back for Gewerbesteuer purposes. This results in an estimated additional annual trade tax cost of approximately €805,000 attributable to the EUR Sub-Tranche interest, which should be incorporated into the Frankfurt campus financial projections.
6. Transfer Pricing. To the extent IHDC on-lends any proceeds from the USD Tranche to IHDC Frankfurt (in addition to or in lieu of IHDC Frankfurt's direct borrowing under the EUR Sub-Tranche), such intercompany loan must be priced at arm's length under both German transfer pricing rules (§ 1 AStG) and US transfer pricing rules (IRC § 482). This analysis is addressed in a separate Transfer Pricing / Intercompany Loan Memorandum.
7. State Tax Implications. State tax implications are manageable. Delaware imposes no entity-level income tax on IHDC as a disregarded entity (though Holdings is subject to Delaware franchise tax). Virginia imposes a 6% corporate income tax on income apportioned to the Commonwealth (with interest expense generally deductible), and Virginia recordation tax will apply to the Deed of Trust filing in Loudoun County (estimated at $1,187,500). No state-level withholding applies to interest payments under the Term Loan.
II. Background and Transaction Description
A. The Borrower and Corporate Structure
Ironhaven Data Centers LLC. IHDC is a Delaware limited liability company (EIN 84-3291057) with its principal executive offices located at 4500 Dominion Ridge Boulevard, Suite 300, Ashburn, Virginia 20147. IHDC is the primary operating entity through which the Ironhaven data center business is conducted in the United States.
IHDC is wholly owned by Ironhaven Holdings Inc. ("Holdings"), a Delaware corporation (EIN 84-3291044). Holdings, in turn, is wholly owned by Thornfield Infrastructure Fund III, LP ("Fund III"), a vintage 2021 infrastructure fund with committed capital of approximately $4.8 billion. Fund III is the relevant fund vehicle of Thornfield Capital Partners, LP, an infrastructure-focused private equity sponsor with its principal offices at 800 Park Avenue, 22nd Floor, New York, New York 10021. The complete ownership chain is therefore: Thornfield Capital Partners, LP (general partner) → Thornfield Infrastructure Fund III, LP (fund vehicle) → Ironhaven Holdings Inc. (Delaware C-corporation) → Ironhaven Data Centers LLC (Delaware LLC, disregarded entity or partnership) → Ironhaven Frankfurt GmbH (German GmbH, wholly-owned subsidiary).
For US federal income tax purposes, IHDC is treated as a disregarded entity (subject to confirmation of the entity classification election as discussed in Section XII below). Assuming disregarded entity status, IHDC's income, deductions, gains, losses, and credits are attributed directly to Holdings, which is a Delaware C-corporation and the relevant taxpayer for federal income tax purposes. If IHDC has instead elected to be treated as a partnership for US federal income tax purposes, the analysis of certain issues addressed herein — most notably, the identity of the taxpayer claiming interest deductions and the application of IRC § 163(j) — would differ, and we would provide supplemental analysis accordingly.
Ironhaven Frankfurt GmbH. IHDC Frankfurt is a German Gesellschaft mit beschränkter Haftung (limited liability company) registered at Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany. IHDC Frankfurt is registered with the Amtsgericht (local court) Frankfurt am Main under registration number HRB 129457. Its German tax identification number (Steuernummer) is 045/127/98321, and its EU VAT identification number (Umsatzsteuer-Identifikationsnummer or "USt-IdNr.") is DE347891205. IHDC Frankfurt is wholly owned by IHDC and serves as the operating entity for the Ironhaven data center business in Germany and, more broadly, in the European market.
Operations. IHDC operates hyperscale data-center campuses designed to serve enterprise cloud computing, artificial intelligence workloads, and managed colocation customers. The company currently has two major campus developments in progress:
Virginia Campus — Ironhaven Ashburn I. Located in Loudoun County, Virginia, the Ironhaven Ashburn I campus encompasses approximately 142 acres with planned total power capacity of 120 megawatts ("MW"). Phase I of the Virginia campus provides for 60 MW of capacity at an estimated Phase I development cost of approximately $475,000,000. Loudoun County is the largest data center market in the world, and IHDC has secured long-term power purchase agreements with Northgate Partners LLC for the full 120 MW build-out.
Frankfurt Campus — Ironhaven Frankfurt I. Located in Frankfurt am Main, Germany, the Ironhaven Frankfurt I campus encompasses approximately 18.7 hectares with planned total power capacity of 80 MW. Phase I of the Frankfurt campus provides for 40 MW of capacity at an estimated Phase I development cost of approximately €253,600,000 (approximately $275,000,000 at the current EUR/USD exchange rate of 1.0846). Frankfurt is the primary data center hub in continental Europe, serving as a key interconnection point for major internet exchange traffic.
Key Financial Metrics. Based on the financial information provided by IHDC management, the following key metrics are relevant to our tax analysis:
These metrics are relevant in particular to the debt-equity characterization analysis (Section III), the IRC § 163(j) business interest expense limitation analysis (Section III.C), and the German interest barrier rule (Zinsschranke) analysis (Section IX.C).
B. Term Loan Structure
The Term Loan is a $950,000,000 aggregate commitment Senior Secured Term Loan B facility. The material economic terms of the Facility are summarized below:
Aggregate Commitments. $950,000,000, structured in two tranches:
USD Tranche: $675,000,000 in aggregate principal amount, bearing interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus 425 basis points per annum, with a SOFR floor of 0.50%. The USD Tranche is denominated and payable in US dollars.
EUR Sub-Tranche: €253,571,429 in aggregate principal amount (approximately $275,000,000 at the reference exchange rate of EUR/USD 1.0846), bearing interest at a floating rate equal to the Euro Interbank Offered Rate ("EURIBOR") plus 425 basis points per annum, with a EURIBOR floor of 0.00%. The EUR Sub-Tranche is denominated and payable in euros.
Original Issue discount. The Term Loan is being offered at an issue price of 99.50% of the aggregate face amount, representing an OID of 50 basis points. The aggregate OID is $4,750,000 ($950,000,000 × 0.50%), resulting in net proceeds to the Borrowers of $945,250,000.
Maturity. The Term Loan matures on June 3, 2031 (seven years from the anticipated closing date of June 3, 2024).
Amortization. The Term Loan amortizes at a rate of 1.00% per annum of the original aggregate principal amount, payable in equal quarterly installments. This results in aggregate quarterly amortization payments of $2,375,000, of which €633,928.57 per quarter is allocable to the EUR Sub-Tranche.
Mandatory Prepayment — Excess Cash Flow Sweep. The Credit Agreement requires mandatory prepayment from Excess Cash Flow ("ECF") at the following rates:
• 75% of ECF, stepping down to
• 50% of ECF when the Net Leverage Ratio is equal to or less than 4.5x, and further stepping down to
• 25% of ECF when the Net Leverage Ratio is equal to or less than 3.5x.
Call Protection. Voluntary prepayments during the first six months following closing (through December 3, 2024) are subject to a soft call premium of 101% of the principal amount prepaid (the "Soft Call Premium").
Change of Control. A change of control triggers a mandatory prepayment at 101% of the outstanding principal amount plus accrued and unpaid interest. A "change of control" is defined, in relevant part, as the occurrence of any event pursuant to which Thornfield Infrastructure Fund III, LP (or its affiliates) ceases to hold, directly or indirectly, more than 50% of the voting equity interests of Ironhaven Holdings Inc.
Financial Covenants. The Credit Agreement contains the following financial maintenance covenants:
• Maximum Net Leverage Ratio: 6.00x
• Minimum Interest Coverage Ratio: 2.00x
• Maximum Capital Expenditures: $325,000,000 (fiscal year 2024), $250,000,000 (fiscal year 2025 and each fiscal year thereafter), with a 25% carry-forward of unused amounts to the immediately succeeding fiscal year
Governing Law. The Credit Agreement is governed by the laws of the State of New York. Security documents relating to IHDC Frankfurt's assets located in Germany are governed by German law.
C. The Lender Syndicate
The lender syndicate consists of seven financial institutions and credit funds, as set forth in the table below:
Crescent Harbor Bank, N.A. serves as the Administrative Agent under the Credit Agreement and as the Lead Arranger for the syndication. NordBrücke AG's commitment of $150,000,000 is allocated entirely to the EUR Sub-Tranche.
Non-US Lenders. Two members of the lender syndicate — NordBrücke AG and Osprey Insurance Capital, Ltd. — are non-US entities. Interest payments to these lenders are subject to the US withholding tax analysis set forth in Section V of this memorandum.
Pacific Rim Institutional Lending Corp. Although Pacific Rim is organized as a Delaware corporation (and therefore is a domestic entity for US federal income tax purposes), it is a wholly-owned subsidiary of a Cayman Islands-domiciled collateralized loan obligation ("CLO") vehicle. We note this relationship because, in certain circumstances, the beneficial ownership of interest payments could be attributed to the Cayman parent rather than to the domestic subsidiary. We recommend confirming that Pacific Rim is the beneficial owner and taxpayer of record for purposes of the interest payments it receives under the Term Loan, and that no look-through treatment applies that would cause a non-US person to be treated as the beneficial owner of such interest. Our preliminary view, based on the information available, is that Pacific Rim, as a separate domestic corporate entity, is the appropriate taxpayer. This conclusion is confirmed, subject to the caveats set forth in Section V.D below.
D. Use of Proceeds
The net proceeds of the Term Loan (approximately $945,250,000 after OID) will be applied as follows:
The refinancing of the Greystone Mezzanine Fund II, LP mezzanine notes includes $130,000,000 of outstanding principal plus $2,708,333.33 of accrued payment-in-kind ("PIK") interest as of the anticipated closing date. The tracing of proceeds to specific uses is relevant to the sourcing of interest deductions and to the allocation of financing costs between the US and German operations.
E. Fees
The following fees are payable in connection with the Term Loan:
Arrangement Fee. IHDC will pay an arrangement fee of $14,250,000 to Crescent Harbor Bank, N.A. in its capacity as Lead Arranger, calculated as 1.50% of the aggregate $950,000,000 commitment amount. This fee is payable at closing on June 3, 2024.
Administrative Agent Fee. IHDC will pay an annual administrative agent fee of $175,000 to Crescent Harbor Bank, N.A. in its capacity as Administrative Agent, payable in quarterly installments of $43,750.
Collateral Agent Fee. IHDC will pay an annual collateral agent fee of $200,000 to Pinnacle Trust Company, N.A. in its capacity as Collateral Agent, consisting of $125,000 per annum for domestic collateral agent services and $75,000 per annum for German security trustee (Sicherheitentreuhänder) services. This fee is payable annually in advance.
Ticking Fee. IHDC will pay a ticking fee of $527,778 to the Lenders, calculated as 0.25% per annum on the aggregate $950,000,000 undrawn commitments for the period from March 15, 2024 (the date of the commitment letter) through June 3, 2024 (the closing date), a period of 80 days on a 360-day basis ($950,000,000 × 0.25% × 80/360 = $527,778).
The tax treatment of each fee component is analyzed in Section X of this memorandum.
III. US Federal Income Tax Classification of the Term Loan — Debt vs. Equity
A. General Framework
The threshold question in analyzing the federal income tax consequences of the Term Loan is whether the Facility will be respected as indebtedness for US federal income tax purposes, as distinct from equity. This classification is of fundamental importance because interest paid on indebtedness is generally deductible by the borrower under IRC § 163(a), whereas distributions on equity are not deductible and may be characterized as dividends subject to differing withholding rates.
The Internal Revenue Code does not provide a comprehensive definition of "indebtedness" for purposes of the interest deduction under IRC § 163 or for other purposes. IRC § 385 authorizes the Secretary of the Treasury to prescribe regulations to determine whether an interest in a corporation is to be treated as stock or indebtedness, and it identifies a non-exclusive list of factors to be taken into account, including: (i) whether there is a written unconditional promise to pay on demand or on a specified date a sum certain in money in return for an adequate consideration in money or money's worth, and to pay a fixed rate of interest; (ii) whether there is subordination to or preference over any indebtedness of the corporation; (iii) the ratio of debt to equity of the corporation; (iv) whether there is convertibility into the stock of the corporation; and (v) the relationship between holdings of stock in the corporation and holdings of the interest in question.
The Treasury has promulgated regulations under IRC § 385 (the so-called "documentation regulations" finalized in 2016 and subsequently amended), which address certain related-party transactions. However, these regulations are generally directed at related-party debt instruments and are unlikely to apply to the Term Loan given that the lenders are independent third-party financial institutions and credit funds.
In the absence of comprehensive statutory or regulatory guidance, courts have developed a multi-factor test to determine whether an instrument constitutes debt or equity for federal income tax purposes. The leading formulations of this test are found in Mixon v. United States, 464 F.2d 394 (5th Cir. 1972), and Santa Anita Consolidated, Inc. v. Commissioner, 50 T.C. 536 (1968). No single factor is dispositive; the determination is based on the totality of the circumstances, with the economic substance of the transaction controlling over its form.
The key factors typically analyzed include:
(a) the presence or absence of a fixed maturity date; (b) whether there is a stated interest rate, and whether the rate is fixed or contingent; (c) the existence of an unconditional obligation to repay principal; (d) the right to enforce payments of principal and interest; (e) the degree of subordination to other indebtedness; (f) the ratio of debt to equity (thin capitalization); (g) whether the instrument carries the right to participate in profits or growth; (h) the identity of interest between creditors and equity holders; (i) the adequacy of capitalization; (j) the intent of the parties; and (k) the presence or absence of a business purpose for the debt.
B. Application to the Term Loan
We analyze each relevant factor as applied to the Term Loan below.
Fixed Maturity Date. The Term Loan has a fixed maturity date of June 3, 2031, precisely seven years from the closing date. A fixed maturity date is a hallmark of indebtedness and strongly supports debt classification. The maturity date is not contingent on any future event (other than acceleration upon default), and the Borrowers are unconditionally required to repay all outstanding principal on or before such date.
Stated Interest Rate. The Term Loan bears interest at a floating rate of SOFR plus 425 basis points (USD Tranche) and EURIBOR plus 425 basis points (EUR Sub-Tranche). While the rate is floating rather than fixed, the spread of 425 basis points over the reference rate is fixed and represents an arm's-length market rate for a senior secured Term Loan B credit facility in the data center infrastructure sector, based on comparable market transactions reviewed by the Calderwood & Harkness Banking & Finance group. The existence of a stated, market-rate interest obligation strongly supports debt classification. The interest rate is not contingent on or measured by the Borrower's profits, revenues, or other equity-like metrics.
Mandatory Amortization. The Term Loan requires mandatory amortization of 1.00% per annum of the original principal amount, payable in equal quarterly installments. Mandatory amortization is a structural feature commonly associated with debt instruments and further supports debt treatment.
Unconditional Obligation to Repay. The Credit Agreement contains an unconditional and absolute obligation on the part of the Borrowers to repay all outstanding principal, accrued interest, fees, and other amounts due under the Facility. The Lenders have the contractual right to enforce payment through the exercise of remedies, including acceleration of the Term Loan upon an Event of Default and foreclosure on pledged collateral. This factor strongly supports debt classification.
No Equity Participation or Conversion Features. The Term Loan does not include any equity participation rights, conversion features, warrants, or any mechanism pursuant to which the Lenders would share in the profits, growth, or equity appreciation of the Borrowers or any member of the Ironhaven group. The Lenders' return is limited to the stated interest, fees, and OID, which is a characteristic of debt, not equity.
Identity Between Creditors and Equity Holders. The seven members of the lender syndicate are independent third-party financial institutions and credit funds. None of the Lenders holds any equity interest in IHDC, Holdings, IHDC Frankfurt, Thornfield Infrastructure Fund III, LP, or Thornfield Capital Partners, LP. There is no overlap, direct or indirect, between the Lenders and the equity holders of the Borrower. This factor strongly supports debt classification and is one of the most significant indicators that the Term Loan represents true arm's-length indebtedness.
Debt-to-Equity Ratio and Adequacy of Capitalization. The pro forma Net Leverage Ratio at closing is 5.35x, calculated as pro forma Net Total Debt of $887,500,000 divided by Adjusted EBITDA of $165,800,000. While a 5.35x leverage ratio is significant, it is within the market range for sponsor-backed infrastructure credits, and particularly for data center businesses, which generate stable, contracted cash flows and benefit from long-term customer arrangements. The covenant structure includes a Maximum Net Leverage Ratio of 6.00x, which provides cushion relative to the pro forma leverage at closing.
Moreover, Thornfield Infrastructure Fund III, LP has contributed equity of $410,000,000 to Holdings, which represents substantial capitalization of the business. The equity contribution provides a meaningful equity cushion below the debt and supports a finding of adequate capitalization.
Business Purpose. The proceeds of the Term Loan are being used for bona fide business purposes, including the construction of two hyperscale data center campuses, refinancing of existing mezzanine indebtedness, and working capital. There is no indication that the Term Loan is being used to effect a tax-motivated distribution to equity or to achieve any purpose that would undermine debt classification.
Conclusion. Based on the foregoing analysis, we conclude that there is a strong basis to treat the Term Loan as indebtedness for US federal income tax purposes. The totality of the circumstances — including the fixed maturity date, stated market-rate interest, mandatory amortization, unconditional repayment obligation, absence of equity features, independent arm's-length lender syndicate, adequate capitalization, and bona fide business purpose — overwhelmingly supports debt classification. Accordingly, interest expense on the Term Loan should be deductible by the Borrower (through Holdings as the relevant taxpayer, assuming IHDC's disregarded entity status is confirmed) under IRC § 163(a), subject to the limitations discussed immediately below.
C. IRC § 163(j) Business Interest Expense Limitation
Even where an instrument is properly classified as indebtedness, the deduction for business interest expense may be subject to the limitation imposed by IRC § 163(j), as amended by the Tax Cuts and Jobs Act of 2017 ("TCJA") and further modified by subsequent legislation.
General Rule. Under IRC § 163(j)(1), the deduction for business interest expense for any taxable year is limited to the sum of:
(i) the taxpayer's business interest income for such taxable year; (ii) 30% of the taxpayer's adjusted taxable income ("ATI") for such taxable year; and (iii) the taxpayer's floor plan financing interest expense for such taxable year (not applicable here).
For taxable years beginning after December 31, 2021, ATI is calculated without adding back depreciation, amortization, or depletion (reverting to the pre-TCJA approach after the temporary TCJA provision allowing such addbacks expired). This narrower definition of ATI may significantly reduce the amount of deductible interest expense relative to earlier years.
Application to IHDC / Holdings. Based on the financial metrics provided by IHDC management, IHDC (through Holdings) is expected to generate substantial EBITDA. The last-twelve-months Adjusted EBITDA as of March 31, 2024 is $165,800,000. However, ATI for purposes of § 163(j) differs from Adjusted EBITDA in several respects, including the exclusion of addbacks for depreciation, amortization, and depletion (for taxable years beginning after December 31, 2021). For purposes of our preliminary analysis, we assume ATI approximates Adjusted EBITDA, recognizing that the actual ATI figure may be lower once depreciation and amortization are factored in.
Estimated Interest Expense. Based on an assumed SOFR rate of approximately 5.30% as of April 2024, the estimated annual interest expense on the USD Tranche is approximately $64,500,000 ($675,000,000 × 9.55%), and the estimated annual interest expense on the EUR Sub-Tranche (converted to US dollars) is approximately $22,500,000 (€253,571,429 × 8.18% × 1.0846), for a total estimated annual interest expense of approximately $87,000,000 (see Appendix D for detailed calculations). When combined with ticking fee, arrangement fee amortization, and other financing costs that may be characterized as interest equivalents, the total annual interest expense subject to the § 163(j) limitation may approximate $90,700,000.
30% of ATI. Assuming ATI of approximately $165,800,000, the 30% limitation would yield a maximum deductible amount of approximately $49,740,000 (plus any business interest income). This suggests that a significant portion of the estimated $90,700,000 in annual interest expense — potentially in excess of $40,000,000 — would be disallowed in the first year, subject to indefinite carryforward under IRC § 163(j)(2).
We emphasize that this is a preliminary estimate. The actual § 163(j) limitation will depend on the taxpayer's realized ATI in each taxable year, including the impact of depreciation and amortization deductions attributable to the data center assets being placed in service, business interest income (if any), and other items.
Real Property Trade or Business Election — IRC § 163(j)(7)(B). A potentially significant planning opportunity exists under IRC § 163(j)(7)(B), which provides that a taxpayer engaged in a "real property trade or business" (as defined in IRC § 469(c)(7)(C)) may elect to be exempt from the § 163(j) limitation. If such an election is made, all business interest expense of the electing trade or business is fully deductible without regard to the 30% ATI limitation.
However, the election comes with an important trade-off: an electing real property trade or business must use the Alternative Depreciation System ("ADS") under IRC § 168(g) to depreciate its nonresidential real property, residential rental property, and qualified improvement property. Under ADS, nonresidential real property is depreciated over 40 years (versus 39 years under MACRS), and certain properties lose eligibility for bonus depreciation under IRC § 168(k). Given the substantial capital expenditures planned for the Virginia and Frankfurt campuses, the loss of bonus depreciation could result in significant timing differences in depreciation deductions.
Whether IHDC qualifies as a "real property trade or business" for purposes of this election requires further analysis, including consideration of whether data center operations constitute a "real property trade or business" within the meaning of § 469(c)(7)(C). While data center operators typically own and operate real property, the characterization may depend on the specific nature of the services provided (e.g., the degree to which IHDC provides "services" to its customers rather than merely leasing space).
Recommendation. We recommend that IHDC engage in detailed multi-year modeling of the § 163(j) limitation, incorporating projected ATI (taking into account depreciation and amortization), projected interest expense, and the interaction with other tax attributes. The model should include a comparison of the after-tax results with and without the § 163(j)(7)(B) real property trade or business election, factoring in the loss of bonus depreciation under ADS. The timing of the election (which is irrevocable) should be carefully evaluated in consultation with IHDC's financial advisors.
IV. OID Analysis
A. Treatment of the 50 bps discount
The Term Loan is being issued at 99.50% of face value, resulting in aggregate OID of $4,750,000 ($950,000,000 face amount minus $945,250,000 net proceeds). The tax treatment of this discount is governed by IRC §§ 1271 through 1275.
General OID Rules. Under IRC § 1272, if a debt instrument is issued with OID, the holder must include the OID in gross income over the life of the instrument using the constant-yield method, regardless of the holder's overall method of tax accounting. Correspondingly, the issuer (here, the Borrower) accrues a deduction for the OID over the same period as additional interest expense.
De Minimis OID Rule. However, under IRC § 1273(a)(3) and Treasury Regulation § 1.1273-1(d), OID is treated as "de minimis" if it is less than 0.25% of the stated redemption price at maturity multiplied by the number of complete years from the date of issue to the maturity date. If OID is de minimis, it is not subject to the constant-yield accrual rules, and instead is generally recognized by the holder (and deducted by the issuer) only upon retirement (or proportionally upon partial repayment) of the instrument.
The de minimis threshold for the Term Loan is calculated as follows:
0.25% × 7 (complete years to maturity) × $950,000,000 = $16,625,000
The actual OID of $4,750,000 is substantially below the de minimis threshold of $16,625,000. Accordingly, the OID on the Term Loan qualifies as de minimis OID, and neither the Lenders nor the Borrower is required to accrue the OID under the constant-yield method. Instead, the OID will generally be recognized only upon repayment of the Term Loan (at maturity or upon prepayment).
Acceleration Upon Prepayment. Notwithstanding the de minimis treatment, if the Term Loan is prepaid (whether through voluntary prepayment, mandatory ECF sweep, or change-of-control mandatory prepayment), the de minimis OID allocable to the prepaid portion of the principal becomes recognizable at the time of such prepayment. This interaction is analyzed further in Section XI below.
Interaction with Soft Call Premium. If the Borrower exercises the soft call right and prepays all or a portion of the Term Loan at 101% during the first six months following closing (through December 3, 2024), the 1% call premium paid to the Lenders constitutes additional amounts received by the Lenders in connection with the retirement of the debt instrument. The treatment of such premium — as capital gain, ordinary income, or additional interest — depends on whether the Term Loan constitutes a "bond" for purposes of IRC § 1271 and on the application of the market discount rules under IRC §§ 1276–1278. For the Borrower, the call premium should be deductible as additional interest expense in the year of prepayment.
B. Treatment of Arrangement Fee and Upfront Fee
Arrangement Fee ($14,250,000). The arrangement fee paid by IHDC to Crescent Harbor Bank, N.A. in its capacity as Lead Arranger is a cost of obtaining the financing and should be treated as a debt issuance cost for US federal income tax purposes. Under IRC § 461 and the capitalization rules of IRC § 263, debt issuance costs are required to be capitalized and amortized over the term of the debt instrument to which they relate. Accordingly, the $14,250,000 arrangement fee should be amortized on a straight-line basis over the seven-year term of the Term Loan, resulting in approximately $2,035,714 of annual amortization expense. For financial accounting purposes, the treatment is consistent under ASC 835-30 (Interest — Imputation of Interest).
OID / Upfront Fee ($4,750,000). As discussed above, the aggregate OID of $4,750,000 is de minimis and will be recognized upon repayment of the Term Loan rather than accrued over its term.
Ticking Fee ($527,778). The ticking fee is payable in respect of the period during which the commitments were outstanding but undrawn (March 15, 2024 through June 3, 2024). The ticking fee is generally treated as a deductible commitment fee or financing expense for US federal income tax purposes and is deductible by the Borrower in the taxable year paid or accrued. The fee constitutes ordinary income to the Lenders. We note that the ticking fee may be characterized as an interest equivalent for purposes of the IRC § 163(j) limitation, which would reduce the amount of other business interest expense that may be deducted in the relevant taxable year.
V. Withholding Tax Analysis — Non-US Lenders
A. General Framework — IRC §§ 871(a) and 881(a)
Under the general rules of IRC § 871(a) (applicable to nonresident alien individuals) and IRC § 881(a) (applicable to foreign corporations), a 30% US federal withholding tax is imposed on the gross amount of certain categories of US-source income — including interest — paid to non-US persons, unless such withholding is reduced or eliminated by an applicable income tax treaty or a statutory exemption.
For purposes of these withholding rules, "interest" includes stated interest, OID, and, in certain circumstances, fees or other amounts that are recharacterized as interest. Interest is US-source if paid by a US person (or, more precisely, if paid by a "domestic corporation" or by any "resident" of the United States). See IRC § 861(a)(1). The source-of-income analysis is relevant to the EUR Sub-Tranche and is discussed in Section V.B below.
The person paying the interest (or any intermediary acting as paying agent) is responsible for withholding the applicable tax and remitting it to the Internal Revenue Service. In this case, IHDC (or Holdings, as the relevant taxpayer if IHDC is a disregarded entity) is the withholding agent. The Credit Agreement designates Crescent Harbor Bank, N.A. as the Administrative Agent and paying agent, and Crescent Harbor may have co-withholding responsibilities as the entity that physically disburses interest payments to the Lenders. The allocation of withholding responsibilities between IHDC and Crescent Harbor should be confirmed in the Credit Agreement's tax provisions.
Portfolio Interest Exemption — IRC § 871(h) / § 881(c). The principal statutory exemption from withholding on interest paid to non-US persons is the "portfolio interest" exemption under IRC § 871(h) (for nonresident alien individuals) and IRC § 881(c) (for foreign corporations). The portfolio interest exemption eliminates withholding on US-source interest if the following conditions are satisfied:
(i) The interest is not effectively connected with the conduct of a trade or business within the United States by the recipient;
(ii) The recipient provides the withholding agent with a valid IRS Form W-8BEN (for individuals) or W-8BEN-E (for entities) certifying its foreign status;
(iii) The obligation on which the interest is paid is in "registered form" within the meaning of IRC § 163(f) and Treasury Regulation § 5f.103-1; and
(iv) The recipient is not (a) a "10-percent shareholder" of the borrower within the meaning of IRC § 871(h)(3)(B) or § 881(c)(3)(B), (b) a "controlled foreign corporation" that is related to the borrower within the meaning of IRC § 881(c)(3)(C), or (c) a "bank" receiving interest described in IRC § 881(c)(3)(A) — i.e., interest received on a loan made in the ordinary course of its banking business.
The "bank" exception in IRC § 881(c)(3)(A) is of particular importance to this analysis because it precludes banks (including BaFin-regulated credit institutions such as NordBrücke AG) from claiming the portfolio interest exemption. This exception is discussed in detail in Section V.B below.
B. NordBrücke AG (German Aktiengesellschaft)
Entity Profile. NordBrücke AG is a German Aktiengesellschaft (stock corporation), regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht ("BaFin") as a credit institution (Kreditinstitut) under the German Banking Act (Kreditwesengesetz, "KWG"). NordBrücke AG is headquartered at Neue Mainzer Straße 72, 60311 Frankfurt am Main, Germany. NordBrücke's commitment of $150,000,000 is allocated entirely to the EUR Sub-Tranche.
The key contact at NordBrücke AG for tax documentation purposes is Dr. Stefan Kleinhans.
Portfolio Interest Exemption — Not Available. As a BaFin-regulated credit institution, NordBrücke AG is a "bank" within the meaning of IRC § 881(c)(3)(A). The statute provides that the portfolio interest exemption does not apply to interest received by a foreign corporation that is a bank on a loan entered into in the ordinary course of its banking business. Because NordBrücke AG is making its commitment under the EUR Sub-Tranche as part of its ordinary course banking and institutional lending activities, the bank exception from the portfolio interest exemption squarely applies. Accordingly, NordBrücke AG cannot rely on the portfolio interest exemption to avoid US withholding tax, and an alternative basis for exemption must be identified.
Treaty Analysis — US-Germany Income Tax Treaty. The United States and the Federal Republic of Germany are parties to the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, signed on August 29, 1989, as amended by the Protocol signed on June 1, 2006 (the "US-Germany Treaty").
Article 11 (Interest). Article 11(1) of the US-Germany Treaty provides that interest arising in a Contracting State (here, the United States) and paid to a resident of the other Contracting State (here, Germany) shall be taxable only in the state of residence of the beneficial owner. Article 11(1) provides that if the beneficial owner of the interest is a resident of Germany, the United States shall impose no withholding tax on such interest — i.e., the treaty provides a 0% withholding rate on interest paid to a German resident that is the beneficial owner of such interest.
For purposes of Article 11, "interest" is defined broadly to include income from debt-claims of every kind, whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds, or debentures. The definition encompasses interest on the EUR Sub-Tranche.
Limitation on Benefits — Article 28. The benefits of the US-Germany Treaty are subject to the Limitation on Benefits ("LOB") provisions of Article 28. Under Article 28, a resident of a Contracting State is entitled to treaty benefits only if such resident qualifies under one or more of the enumerated tests. NordBrücke AG is expected to satisfy the LOB requirements through one or more of the following bases:
(a) Publicly traded company test (Article 28(2)(c)): If NordBrücke AG's principal class of shares is regularly traded on a recognized stock exchange, it satisfies this test. We understand from publicly available information that NordBrücke AG's shares may be listed on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse), although this should be confirmed.
(b) Active trade or business test (Article 28(4)): NordBrücke AG is actively engaged in the banking business in Germany through its BaFin-regulated operations, and the interest income it derives from the EUR Sub-Tranche is connected to this active trade or business. This test requires that the income be derived in connection with, or be incidental to, the active conduct of a trade or business in the residence state.
(c) Qualified resident test: Additional alternative bases for LOB qualification may be available.
NordBrücke AG should certify its LOB qualification on Part III of IRS Form W-8BEN-E.
Withholding Documentation. To claim the treaty benefit, NordBrücke AG must provide IHDC (or its withholding agent) with a properly completed and executed IRS Form W-8BEN-E, which must include:
• Certification of foreign status and identification of NordBrücke AG as a corporation resident in Germany;
• A claim of treaty benefits under the US-Germany Treaty, Article 11 (Interest), specifying the 0% withholding rate;
• LOB certification under Part III of the form;
• NordBrücke AG's Global Intermediary Identification Number ("GIIN") for FATCA purposes; and
• Any other information required by the form's instructions.
Source-of-Income Analysis for EUR Sub-Tranche. An important collateral issue arises with respect to the source of the interest payments on the EUR Sub-Tranche. Under IRC § 861(a)(1), interest paid by a "domestic corporation" is generally treated as US-source income. However, if the primary obligor on the EUR Sub-Tranche is IHDC Frankfurt (a German GmbH), rather than IHDC (a US entity), the interest may be treated as foreign-source income under the same provision (or under general source-of-income principles), since interest paid by a foreign corporation is generally treated as foreign-source income.
The structure of the Credit Agreement must be examined to determine whether IHDC Frankfurt is the primary obligor on the EUR Sub-Tranche or whether IHDC (the US entity) is the borrower with IHDC Frankfurt acting as a co-borrower or guarantor. If IHDC Frankfurt is the primary obligor and is treated as the payer of interest on the EUR Sub-Tranche for US federal income tax purposes, then the interest would be foreign-source, and no US withholding tax would apply regardless of the availability of the US-Germany Treaty. This analysis would make the treaty benefit analysis with respect to NordBrücke AG moot as to the EUR Sub-Tranche (though the treaty would remain relevant as a backstop).
We recommend that the Credit Agreement be reviewed to confirm the allocation of borrower obligations between IHDC and IHDC Frankfurt with respect to each tranche, and that the source-of-income analysis be finalized in coordination with Daniel Obi and Lisa Morrow.
Conclusion. Interest paid to NordBrücke AG on the EUR Sub-Tranche should be exempt from US withholding tax under Article 11 of the US-Germany Treaty, provided that NordBrücke AG delivers a valid IRS Form W-8BEN-E claiming the treaty benefit and satisfying the LOB requirements. In addition, to the extent IHDC Frankfurt (rather than IHDC) is treated as the primary obligor on the EUR Sub-Tranche, the interest may be treated as foreign-source, eliminating the need for US withholding regardless of treaty benefits.
C. Osprey Insurance Capital, Ltd. (Bermuda Exempted Company)
Entity Profile. Osprey Insurance Capital, Ltd. is a Bermuda exempted company with its registered office at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. Osprey's commitment under the Term Loan is $75,000,000, allocated to the USD Tranche. Osprey is an insurance company that makes credit investments as part of its investment portfolio management activities.
The key contact at Osprey for tax documentation purposes is Fiona Abernathy, Head of Credit Investments.
Portfolio Interest Exemption — Available (Subject to Confirmation). Unlike NordBrücke AG, Osprey Insurance Capital, Ltd. is not a "bank" within the meaning of IRC § 881(c)(3)(A). Osprey is an insurance company, and its lending activities under the Term Loan are investment activities rather than banking activities conducted in the ordinary course of a banking business. Accordingly, the bank exception from the portfolio interest exemption does not apply to Osprey.
The remaining conditions for the portfolio interest exemption must be satisfied:
(i) Not effectively connected income: Osprey is a Bermuda company and, to our knowledge, does not conduct a trade or business within the United States. Accordingly, the interest received on the Term Loan is not effectively connected with a US trade or business.
(ii) Valid IRS Form W-8BEN-E: Osprey must provide a valid IRS Form W-8BEN-E certifying its foreign status and claiming the portfolio interest exemption. The form must be delivered to IHDC (or its withholding agent) prior to the first payment of interest.
(iii) Registered form: The Term Loan must be in "registered form" within the meaning of IRC § 163(f) and Treasury Regulation § 5f.103-1. We have confirmed that the Credit Agreement provides for the Term Loan to be in registered form — the Administrative Agent maintains a register of Lenders, and interests in the Term Loan are not transferable in bearer form. This requirement is satisfied.
(iv) Not a 10% shareholder: Based on our understanding, Osprey does not hold, directly or indirectly, 10% or more of the total combined voting power of all classes of stock of Ironhaven Holdings Inc. (or, if IHDC is a partnership, 10% or more of the capital or profits interests in IHDC). This condition appears to be satisfied, but should be confirmed.
(v) Not a related CFC: Based on our understanding, Osprey is not a controlled foreign corporation related to IHDC within the meaning of IRC § 881(c)(3)(C). This condition appears to be satisfied, but should be confirmed.
Treaty Analysis — US-Bermuda. There is no income tax treaty between the United States and Bermuda. Bermuda does not impose income tax on its residents, and there is no bilateral agreement that would reduce or eliminate US withholding tax on interest. Accordingly, Osprey cannot rely on a treaty to reduce US withholding, and the portfolio interest exemption is the primary (and sole viable) path to exemption from the 30% statutory withholding rate.
UK-Person Nexus. We note that Fiona Abernathy and certain other key personnel of Osprey have UK-person nexus. While this does not have a direct US tax implication for the withholding analysis, we observe that if Osprey were treated as a UK tax resident for purposes of the US-UK Income Tax Treaty, Article 11 of that treaty could provide a 0% withholding rate on interest. However, Osprey is incorporated in Bermuda and, based on available information, is not a UK tax resident for treaty purposes. We do not rely on the US-UK Treaty in our analysis and instead recommend reliance on the portfolio interest exemption as the primary basis for exemption.
FATCA Considerations. As a Bermuda entity, Osprey's FATCA compliance status is analyzed separately in Section VI.C below. In brief, Bermuda has entered into a Model 1 IGA with the United States, and Osprey must be registered with the IRS and obtain a GIIN (or qualify as an exempt beneficial owner or deemed-compliant FFI) to avoid FATCA withholding. Osprey must provide its GIIN and certify its FATCA status on the Form W-8BEN-E.
Risk Factor. If Osprey fails to deliver a valid Form W-8BEN-E or ceases to qualify for the portfolio interest exemption (for example, if it acquires a 10% shareholder interest in Holdings or fails to maintain its FATCA compliance), IHDC would be required to withhold 30% on all interest payments to Osprey. In such event, the Credit Agreement's tax gross-up provisions (analyzed in Section VII) would require IHDC to gross up payments — but only if the resulting withholding tax constitutes an "Indemnified Tax" and not an "Excluded Tax." If the withholding is attributable to Osprey's failure to deliver required tax forms, it would constitute an Excluded Tax, and Osprey would bear the economic cost of the withholding.
Conclusion. Interest paid to Osprey Insurance Capital, Ltd. should be exempt from US withholding tax under the portfolio interest exemption of IRC § 881(c), subject to the delivery of a valid IRS Form W-8BEN-E certifying Osprey's foreign status, claiming the portfolio interest exemption, and providing FATCA compliance certification (including its GIIN). We recommend confirming the factual predicates for the exemption — namely, that Osprey is not a 10% shareholder and is not a related CFC — prior to closing.
D. Pacific Rim Institutional Lending Corp. — Look-Through Considerations
Pacific Rim Institutional Lending Corp. is a Delaware corporation with its principal office in San Francisco, California. As a US domestic corporation, Pacific Rim is not subject to withholding tax on US-source interest payments it receives under the Term Loan. Pacific Rim provides an IRS Form W-9 to the withholding agent, and no withholding applies.
However, Pacific Rim is a wholly-owned subsidiary of a Cayman Islands-domiciled CLO vehicle. We flag this relationship because, in certain limited circumstances, the Internal Revenue Service or the applicable withholding agent may look through a domestic entity to its foreign parent for purposes of determining the beneficial owner of interest payments. In particular, if the domestic entity is disregarded for US federal tax purposes (e.g., as a single-member LLC treated as a disregarded entity), or if the structure is otherwise collapsed under anti-abuse or economic substance principles, the Cayman parent could be treated as the beneficial owner of the interest income, potentially triggering withholding obligations.
Based on the information available, Pacific Rim Institutional Lending Corp. is organized as a corporation (not as an LLC or other entity that could be a disregarded entity), and we expect that it has made or will be treated as having made the default classification election as a corporation under the check-the-box regulations (Treasury Regulation § 301.7701-3). As a separate corporate entity, Pacific Rim is the beneficial owner and taxpayer of record with respect to interest payments it receives.
Conclusion. No US withholding tax applies to interest payments made to Pacific Rim Institutional Lending Corp. as a domestic corporation. We recommend confirming Pacific Rim's entity classification and beneficial ownership status prior to closing, but do not anticipate any issues.
E. Form W-8BEN-E Collection and Compliance
Each non-US Lender is required to provide a properly completed and executed IRS Form W-8BEN-E to the withholding agent (IHDC and/or Crescent Harbor Bank, N.A. as Administrative Agent) prior to the first payment to which the form relates. In practice, forms should be collected prior to funding on June 3, 2024.
The following forms are required:
Expiration and Renewal. Under Treasury Regulation § 1.1441-1(e)(4)(ii), a Form W-8BEN-E generally remains valid through the last day of the third calendar year following the year in which the form is signed, unless a change in circumstances makes any information on the form incorrect (in which case the form becomes invalid and must be replaced within 30 days of the change in circumstances). For a form signed in 2024, the expiration date would be December 31, 2027.
Given that the Term Loan matures on June 3, 2031, at least one renewal cycle for each W-8BEN-E will be required during the life of the Facility. We strongly recommend that IHDC and/or the Administrative Agent establish a tracking system for W-8BEN-E expiration dates and initiate renewal requests to each non-US Lender no fewer than 60 days prior to expiration.
Calderwood & Harkness has prepared a transmittal package with instructions for the completion of the required W-8BEN-E forms. This package was circulated to NordBrücke AG and Osprey Insurance Capital, Ltd. under separate cover on April 22, 2024 (see separate W-8BEN-E Transmittal Memorandum).
VI. FATCA (Foreign Account Tax Compliance Act) — IRC §§ 1471–1474
A. General Framework
The Foreign Account Tax Compliance Act ("FATCA"), enacted as part of the Hiring Incentives to Restore Employment Act of 2010, added IRC §§ 1471 through 1474 to the Internal Revenue Code. FATCA imposes a 30% withholding tax on certain "withholdable payments" — including US-source interest — made to "foreign financial institutions" ("FFIs") and "non-financial foreign entities" ("NFFEs") that do not comply with FATCA's reporting and due diligence requirements or that do not qualify for an applicable exemption.
The FATCA withholding obligation is separate from, and in addition to, the withholding obligations under IRC §§ 871 and 881 discussed in Section V above. Even if a non-US Lender is exempt from withholding under a treaty or the portfolio interest exemption, FATCA withholding may apply independently if the Lender fails to comply with FATCA requirements.
The United States has entered into Intergovernmental Agreements ("IGAs") with numerous jurisdictions to facilitate FATCA compliance. Under a Model 1 IGA, financial institutions in the partner jurisdiction report account information to their local tax authority (rather than directly to the IRS), and the local tax authority exchanges the information with the IRS. FFIs in Model 1 IGA jurisdictions are generally treated as "deemed compliant" provided they comply with local implementing legislation.
B. NordBrücke AG — FATCA Analysis
Germany has entered into a Model 1 IGA with the United States, effective as of July 31, 2014. Under this IGA, German financial institutions that comply with the reporting requirements of the German implementing legislation (the FATCA-USA-Umsetzungsverordnung) are treated as "Reporting Model 1 FFIs" and are deemed compliant with FATCA.
NordBrücke AG, as a BaFin-regulated credit institution, is classified as a "Reporting Model 1 FFI" under the Germany-US IGA. Provided that NordBrücke AG complies with its reporting obligations under German law and provides its GIIN on its IRS Form W-8BEN-E, no FATCA withholding should apply to interest payments made to NordBrücke AG under the EUR Sub-Tranche.
We recommend confirming NordBrücke AG's GIIN upon receipt of its Form W-8BEN-E by verifying the GIIN against the IRS FFI List maintained on the IRS website.
C. Osprey Insurance Capital, Ltd. — FATCA Analysis
Bermuda has entered into a Model 1 IGA with the United States, effective as of December 19, 2013. Under this IGA, Bermuda financial institutions that comply with the reporting requirements of Bermuda's implementing legislation are treated as "Reporting Model 1 FFIs" and are deemed compliant with FATCA.
As a Bermuda exempted company engaged in insurance and credit investment activities, Osprey Insurance Capital, Ltd. may be classified as either a "Financial Institution" (if it is an "Investment Entity" as defined under the IGA) or as a "Non-Financial Foreign Entity." The correct classification depends on the nature and scope of Osprey's business activities:
• If Osprey primarily conducts insurance activities (underwriting and risk assumption), it may be classified as a "Specified Insurance Company" under the IGA, which is a category of Financial Institution.
• If Osprey primarily manages and invests assets (including credit investments such as the Term Loan), it may be classified as an "Investment Entity," which is also a category of Financial Institution under the IGA.
• In either case, as a Financial Institution in a Model 1 IGA jurisdiction, Osprey must register with the IRS and obtain a GIIN, or qualify as an "exempt beneficial owner" or "deemed-compliant FFI" under the IGA.
Osprey must certify its FATCA status on Part I of its IRS Form W-8BEN-E and provide its GIIN (if required to obtain one). If Osprey is properly classified and provides a valid GIIN, no FATCA withholding should apply.
Risk. If Osprey fails to register with the IRS, fails to obtain or maintain a GIIN, or otherwise fails to comply with FATCA requirements, IHDC would be required to impose 30% FATCA withholding on all interest payments to Osprey. In such event, the Credit Agreement's tax gross-up provisions would need to be analyzed to determine whether FATCA withholding attributable to Osprey's noncompliance constitutes an "Excluded Tax" (as we expect it would, based on the standard market formulation discussed in Section VII below). If FATCA withholding is an Excluded Tax, IHDC would not be required to gross up such payments, and Osprey would bear the economic cost.
D. Domestic Lenders — FATCA
The five US-domiciled Lenders — Crescent Harbor Bank, N.A., Ridgeline National Bank, Marlowe Asset Management Meridian Capital, LLC, Atlas Peak Credit Partners, LP, and Pacific Rim Institutional Lending Corp. — are domestic entities and provide IRS Forms W-9 certifying their US status. FATCA withholding does not apply to payments made to domestic entities. No further FATCA analysis is required with respect to these Lenders.
VII. Tax Gross-Up and Indemnity Provisions of the Credit Agreement
The Credit Agreement contains standard tax gross-up and indemnity provisions that allocate the economic risk of withholding taxes between the Borrower and the Lenders. These provisions are typical for institutional syndicated credit facilities and are generally consistent with the Loan Syndications and Trading Association ("LSTA") model provisions.
Indemnified Taxes. The Credit Agreement defines "Indemnified Taxes" to include all present or future taxes required to be deducted or withheld fro

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