Fitch Places SFA ABS CDO III Ltd on Rating Watch Negative

Business Wire, March 8, 2005

CHICAGO -- Fitch Ratings has placed the following three classes of notes issued by SFA ABS CDO III Ltd. (SFA III) on Rating Watch Negative.

-- $50,000,000 class B notes rated 'AA';

-- $12,579,150 class C notes rated 'BBB';

-- $12,500,000 preference shares rated 'BB-'.

SFA III is a collateralized debt obligation (CDO) managed by Structured Finance Advisors, which closed June 25, 2002. SFA III will remain in its reinvestment period through the payment occurring in July 2005. In addition to credit improved, credit risk, defaulted, and equity sales, discretionary trading of up to 10% may occur per calendar year. Currently, SFA III is composed of 71.8% residential mortgage-backed securities (RMBS), 19.1% asset-backed securities (ABS), 5.9% CDOs and 3.2% commercial mortgage-backed securities (CMBS).

Since closing, the collateral has deteriorated, affecting various quality tests and projected cash flow. The class A/B overcollateralization (OC) ratio and class C OC ratio have decreased from 111% and 104.7%, respectively, to 107.8% and 102.4%, respectively, as of the most recent trustee report dated Jan. 31, 2005. Both the class A/B OC ratio and the class C OC ratio are passing their test levels of 106% and 102.3%, respectively. Both the class A/B interest coverage (IC) ratio and the class C IC ratio are passing their respective test levels at 129.8% and 119.4%. Below investment grade assets represented approximately 18.7% of the portfolio as of the most recent trustee report. The Fitch weighted average rating factor (WARF) is failing at 21.6 ('BBB-/BB ') versus a trigger of 17 ('BBB/BBB-') and the weighted average coupon of fixed rate collateral is failing at 7.17% versus 7.20%. Additionally, the weighted average life and weighted average spread of floating rate collateral tests are passing.

The deteriorating credit quality of the portfolio has increased the credit risk of this transaction to the point the risk may no longer be consistent with the ratings. Fitch will review this transaction and take appropriate rating action upon completion of its analysis. Additional deal information and historical data are available on the Fitch Ratings web site at 'www.fitchratings.com'.