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Rating Action:

Moody's lowers ratings of 63 Notes issued by 12 structured finance CDO transactions

Global Credit Research - 18 Feb 2009

New York, February 18, 2009 -- Moody's Investors Service announced today that it has downgraded its ratings of 63 Notes issued by 12 collateralized debt obligation transactions which consist of significant exposure to one or more of Alt-A, Option-ARM and subprime RMBS securities, CLOs, or CMBS. Moody's explained that the rating actions listed below reflect certain updates and projections on these asset classes as described below.

Moody's revised loss projections for Alt-A RMBS securities which were described in a press release titled "Moody's Updated Loss Projections for '06 and '07 Alt-A RMBS," published on January 22, 2009. According to the press release, on average, Moody's is now projecting cumulative losses of about 20% for 2006 securitizations and about 24% for 2007 securitizations. As a result of the revised loss projections, in most cases, subordinate Alt-A RMBS securities are likely to be completely written down. Moody's is likely to downgrade the ratings of these securities to Ca or C. In addition, according to the press release, credit protection from structural features should provide most senior Alt-A RMBS bond holders with fairly high recovery rates, although approximately 80-85% of all senior securities are likely to experience recoveries consistent with ratings lower than B3. For more details on the revised loss projections and Moody's updated Alt-A surveillance methodology, please see "Alt-A RMBS Loss Projection Update: January 2009," available on Moodys.com.

Moody's revised loss projections for Option ARMs RMBS securities issued in the US since 2004 which were described in a press release titled "Moody's updates loss projections for Option ARMs RMBS" published on February 5, 2009. According to the press release, on average, Moody's is now projecting cumulative losses of 27% for 2006 and 30% for 2007 vintage Option ARM securitizations. Given the revised loss projections Moody's expects that ratings on most subordinate securities in this review will be downgraded to Ca or C. Senior certificates in several Option ARM transactions have sequential loss allocation after the mezzanines have been written down. As a result, the senior most bonds are likely to be downgraded below Baa3 while senior support securities are likely to be downgraded to Ca or C. For more details on the revised loss projections and Moody's updated Option ARMs surveillance methodology, please see "Option ARMs Loss Projection Update: February 2009" available on Moodys.com.

Moodys announced revisions and updates to certain key assumptions, including Default Probability and Diversity Score, that it uses to rate and monitor collateralized loan obligations (CLOs) in a Press Release titled "Moody's updates key assumptions for rating CLOs" published on February 4, 2009. According to the press release, Moody's expects that the revised assumptions will have a significant impact on mezzanine and junior CLO tranches, resulting in a downgrade of their ratings by three to six notches on average.

Moody's also announced a ratings review of all U.S. commercial mortgage backed securities (CMBS) conduit and fusion transactions rated during the period from 2006 through 2008, and all large loan and single borrower transactions regardless of vintage in a Press Release titled " Ratings review of certain U.S. CMBS" on February 5, 2009. Based on this press release, Low investment grade and speculative grade rated bonds are likely to be downgraded by five to six notches on average.

Moody's announced on September 18, 2008 that it is revising its expected loss assumptions which are used for the surveillance of ratings of ABS CDOs holding subprime RMBS, specifically of the second half 2005 -- first half 2007 vintages. Moody's stated that for purposes of monitoring its ratings of ABS CDOs with exposure to subprime RMBS, it will rely on certain projections of the lifetime average cumulative losses for vintages of RMBS set forth in a recent Moody's Special Report, "Subprime RMBS Loss Projection Update: September 2008." Moody's explained that it will utilize the range of loss projections primarily set forth in the report to modify its prior assumptions of the expected loss inputs when monitoring ABS.

In addition, Moody's explained that the rating actions taken today incorporate the application of revised and updated key modeling parameter assumptions that Moody's uses to rate and monitor ratings of SF CDOs. The revisions affect the three key parameters in Moody's model for rating SF CDOs: asset correlation, default probability and recovery rate. Moody's announced the changes to these assumptions in a press release titled "Moody's Updates its Key Assumptions for Rating Structured Finance CDOs," published on December 11, 2008.

Moody's initially analyzed and continues to monitor these transactions using primarily the methodology and its supplements for ABS CDOs as described in Moody's Special Reports below:

Moody's Approach to Rating Multisector CDOs (9/15/2000)

Moody's Approach To Rating Synthetic Resecuritizations (10/29/2003)

Moody's Revisits its Assumptions Regarding Structured Finance Default (and Asset) Correlations for CDOs (6/27/2005)

Moody's Modeling Approach to Rating Structured Finance Cash Flow CDO Transactions (9/26/2005)

These reports can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Credit Policy & Methodologies directory.

Today's rating actions are as follows:

ACA ABS 2002-1, Limited

$305,000,000 Class A First Priority Senior Secured Floating Rate Notes, due August 1, 2034, Downgraded to Aa2; previously on 7/31/2002 Assigned Aaa

$64,000,000 Class B Second Priority Senior Secured Floating Rate Notes, due August 1,2037, Downgraded to Caa1; previously on 5/9/2008 Downgraded to A2 and Placed Under Review for Possible Downgrade

Altius III Funding, Ltd.

U.S.$ 220,000,000 Class A-1a Floating Rate Notes Due 2041, Downgraded to Ca; Previously on 12/16/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

U.S.$ 499,950,000 Class A-1b-1B Floating Rate Notes Due 2041, Downgraded to Ca; Previously on 10/23/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

U.S.$ 499,950,000 Class A-1b-1F Floating Rate Notes Due 2041, Downgraded to Caa3; Previously on 12/16/2008 Downgraded to Ba1 and remains Under Review for Possible Downgrade

U.S.$ 300,000,000 Class A-1b-2 Floating Rate Notes Due 2041, Downgraded to Ca; Previously on 12/16/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

U.S.$ 250,000,000 Class A-1b-3 Floating Rate Notes Due 2041, Downgraded to Ca; Previously on 12/16/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

U.S.$ 100,000 Class A-1b-V Floating Rate Notes Due 2041, Downgraded to Ca; Previously on 12/16/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

U.S.$ 90,000,000 Class A-2 Floating Rate Notes Due 2041, Downgraded to C; Previously on 10/23/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

U.S. $ 88,000,000 Class B Floating Rate Notes Due 2041, Downgraded to C; Previously on 10/23/2008 Downgraded to Ca

U.S. $ 17,500,000 Class S Floating Rate Notes Due 2014, Confirmed at Aaa; Previously on 12/16/2008 Aaa Placed Under Review for Possible Downgrade

Camber 3 plc

USD 10,000,000 Class S Floating Rate Notes due 2015, Confirmed at Aaa; previously on 12/17/2008 Aaa Placed Under Review for Possible Downgrade

USD 422,500,000 Class A-1 Floating Rate Notes due 2040, Downgraded to Caa2; previously on 12/17/2008 Downgraded to B3 and remains Under Review for Possible Downgrade

USD 110,500,000 Class A-2 Floating Rate Notes due 2040, Downgraded to Ca; previously on 12/17/2008 Downgraded to Caa2 and remains Under Review for Possible Downgrade

USD 45,500,000 Class B Floating Rate Notes due 2040, Downgraded to C; previously on 11/7/2008 Downgraded to Ca

Commodore CDO I, Limited

$227,400,000 Class A Floating Notes, Downgraded to Baa1; previously on 2/27/2002 Assigned Aaa

$42,750,000 Class B Floating Rate Notes, Downgraded to Ca; previously on 6/4/2008 Downgraded to Baa3

$17,550,000 Class C Floating Rate Notes, Downgraded to C; previously on 6/4/2008 Downgraded to Caa3

Diversified Asset Securitization Holdings II, L.P.

U.S. $332,500,000 Class A-1L Floating Rate Notes Due 2035, Downgraded to Ba1; previously on 9/26/2000 Assigned Aaa

U.S. $52,500,000 Class A-1 7.8725% Notes Due 2035, Downgraded to Ba1; previously on 9/26/2000 Assigned Aaa

U.S. $50,000,000 Class A-2L Floating Rate Notes Due 2035, Downgraded to Caa2; previously on 12/22/2004 Downgraded to A1

U.S. $37,000,000 Class B-1 9.7121% Notes Due 2035, Downgraded to C; previously on 12/22/2004 Downgraded to Caa3

Duke Funding IV, Ltd.

U.S. $90,000,000 Class A-2 First Priority Senior Secured Flt. Rt. Notes due 2023, Downgraded to Caa3; previously on 12/23/2008 Downgraded to Ba3 and remains Under Review for Possible Downgrade

U.S. $42,000,000 Class B Second Priority Senior Secured Flt. Rt Notes due 2038, Downgraded to C; previously on 12/23/2008 Downgraded to Caa2 and remains Under Review for Possible Downgrade

U.S. $17,500,000 Class C Mezzanine Secured Flt. Rt. Notes due 2038, Downgraded to C; previously on 6/30/2008 Downgraded to Ca

U.S. $11,000,000 Preference Shares, Downgraded to C; previously on 6/30/2008 Downgraded to Ca

Composite 2 Securities, Downgraded to Caa3; previously on 12/23/2008 Downgraded to A3 and remains Under Review for Possible Downgrade

Composite Securities, Downgraded to C; previously on 12/23/2008 Downgraded to Ba3 and remains Under Review for Possible Downgrade

Fortius I Funding, Ltd.

U.S. $ 11,500,000 Class S Floating Rate Notes Due 2010, Downgraded to A1; previously on 12/16/2008 Aaa Placed Under Review for Possible Downgrade

U.S. $ 390,000,000 Class A-1 Floating Rate Notes Due 2041, Downgraded to Ca; previously on 12/16/2008 Downgraded to Ba3 and remains Under Review for Possible Downgrade

U.S. $ 84,000,000 Class A-2 Floating Rate Notes Due 2041, Downgraded to C; previously on 12/16/2008 Downgraded to Caa2 and remains Under Review for Possible Downgrade

U.S. $ 57,000,000 Class B Floating Rate Notes Due 2041, Downgraded to C; previously on 10/23/2008 Downgraded to Ca

Hout Bay 2006-1 Ltd.

U.S. $4,000,000 Class S Floating Rate Notes Due 2014, Confirmed at Aaa; previously on 12/16/2008 Aaa Placed Under Review for Possible Downgrade

U.S.$1,275,000,000 Class A-1 Floating Rate Notes Due 2041, Downgraded to Ca; previously on 12/16/2008 Downgraded to Caa3 and remains Under Review for Possible Downgrade

Pacific Shores CDO, Ltd

U.S.$532,000,000 Class A First Priority Senior Secured Floating Rate Notes Due 2037, Downgraded to A2; previously on 6/28/2002 Assigned Aaa

U.S. $96,000,000 Class B-1 Second Priority Senior Secured Floating Rate Notes Due 2037, Downgraded to Caa3; previously on 1/22/2007 Confirmed Aa1

U.S. $16,000,000 Class B-2 Second Priority Senior Secured Floating Rate Notes Due 2037, Downgraded to Caa3; previously on 1/22/2007 Confirmed Aa1

U.S.$28,000,000 Class C Mezzanine Secured Floating Rate Notes Due 2037, Downgraded to C; previously on 1/22/2007 Upgraded to Baa1

$21,500,000 Class 1 Preference Shares, Downgraded to C; previously on 1/22/2007 Upgraded to Baa2

$7,000,000 Class 2 Preference Shares, Downgraded to C; previously on 1/22/2007 Upgraded to Baa2

Solstice ABS CDO II LTD

U.S.$237,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due 2038, Downgraded to B2; previously on 4/7/2008 Aaa Placed Under Review for Possible Downgrade

U.S.$96,000,000 Class A-2 First Priority Senior Secured Floating Rate Term Notes due 2038, Downgraded to B2; previously on 4/7/2008 Aaa Placed Under Review for Possible Downgrade

U.S.$66,500,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2038, Downgraded to Ca; previously on 6/9/2008 Downgraded to B2 and remains Under Review for Possible Downgrade

Solstice ABS III, Ltd.

U.S. $346,500,000 Class A-1 Senior Secured Floating Rate Notes due 2033, Confirmed at Aaa; previously on 12/23/2008 Aaa Placed Under Review for Possible Downgrade

U.S. $107,500,000 Class A-2 Senior Secured Floating Rate Notes due 2033, Downgraded to Ba2; previously on 12/23/2008 Downgraded to Aa3 and Placed Under Review for Possible Downgrade

U.S. $47,500,000 Class B Senior Secured Floating Rate Notes due 2039, Downgraded to Ca; previously on 12/23/2008 Downgraded to Baa1 and remains Under Review for Possible Downgrade

U.S. $19,000,000 Class C-1 Mezzanine Floating Rate Notes due 2039, Downgraded to C; previously on 5/30/2008 Downgraded to Ca

U.S. $5,000,000 Class C-2 Mezzanine Fixed Rate Notes due 2039, Downgraded to C; previously on 5/30/2008 Downgraded to Ca

U.S. $24,000,000 Preference Shares, Downgraded to C; previously on 5/30/2008 Downgraded to Ca

U.S. $8,000,000 Pass-Through Notes due 2039, Downgraded to C; previously on 12/23/2008 Downgraded to Ca

Tower Hill CDO II, Ltd.

U.S. $0 Class A-1 Senior Secured Funded Notes Due 2023, Downgraded to Baa2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Aa2 and Placed Under Review for Possible Downgrade

U.S. $0 Class A-2 Senior Secured Funded Notes Due 2023, Downgraded to Ba1 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Aa3 and Placed Under Review for Possible Downgrade

U.S. $0 Class B Type 2 Senior Secured Funded Notes Due 2023, Downgraded to Ba2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to A2 and Placed Under Review for Possible Downgrade

U.S. $0 Class C Type 2 Secured Funded Deferrable Notes Due 2023, Downgraded to B3 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Baa2 and Placed Under Review for Possible Downgrade

U.S. $9,415,000 Class A-X Notes Due 2023, Downgraded to Aa2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Aaa Placed Under Review for Possible Downgrade

U.S. $300,000,000 Class A-1 Senior Secured Unfunded Notes Due 2023, Downgraded to Baa2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Aa2 and Placed Under Review for Possible Downgrade

U.S. $45,000,000 Class A-2 Senior Secured Unfunded Notes Due 2023, Downgraded to Ba1 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Aa3 and Placed Under Review for Possible Downgrade

U.S. $11,000,000 Class B Type 1 Senior Secured Funded Notes Due 2023, Downgraded to Ba2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to A2 and Placed Under Review for Possible Downgrade

U.S. $20,000,000 Class B Type 2 Senior Secured Unfunded Notes Due 2023, Downgraded to Ba2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to A2 and Placed Under Review for Possible Downgrade

U.S. $50,000,000 Class C Type 1 Secured Funded Deferrable Notes Due 2023, Downgraded to B3 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Baa2 and Placed Under Review for Possible Downgrade

U.S. $25,000,000 Class C Type 2 Secured Unfunded Deferrable Notes Due 2023, Downgraded to B3 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Baa2 and Placed Under Review for Possible Downgrade

U.S. $53,000,000 Class D Secured Floating Rate Deferrable Notes Due 2023, Downgraded to Caa2 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to Ba2 and Placed Under Review for Possible Downgrade

U.S. $53,000,000 Class E Secured Floating Rate Deferrable Notes Due 2023, Downgraded to Caa3 and remains Under Review for Possible Downgrade; previously on 12/11/2008 Downgraded to B2 and Placed Under Review for Possible Downgrade

New York
Stephen Lioce
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Evan Tepper
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's lowers ratings of 63 Notes issued by 12 structured finance CDO transactions
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