Fitch Downgrades $395MM From Bering CDO I, Ltd

Business Wire,  July 14, 2008  

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NEW YORK -- Fitch Ratings has downgraded and removed from Rating Watch Negative seven classes of notes issued by Bering CDO I, Ltd. (Bering). The following rating actions are effective immediately:

--$169,488,597 Class A-1S1 to 'B' from 'A';

--$93,000,000 Class A-1S2 to 'CCC' from 'BBB';

--$42,000,000 Class A-1J to 'CC' from 'BBB-;

--$40,000,000 Class A-2 to 'CC' from 'BB';

--$14,286,839 Class A-3 to 'C' from 'B';

--$16,086,072 Class B to 'C' from 'CCC';

--$4,290,836 Class C to 'C' from 'CC'.

Bering is a collateralized debt obligation (CDO) that closed on Aug. 15, 2006 and is managed by Terwin Money Management, LLC. Bering's reinvestment period ends in October 2010; however, due to overcollateralization (OC) test failures the deal has become static. Bering's portfolio is composed primarily of Alternative-A (Alt-A) residential mortgage-backed securities (RMBS) (44.9%), subprime RMBS (29.1%), prime RMBS (24%), and structured finance (SF) CDOs (2%). Subprime RMBS of the 2005 and 2006 vintages account for approximately 19.4% and 9.7% of the portfolio, respectively. Alt-A RMBS of the 2005, 2006 and 2007 vintages represent approximately 31.9%, 9.5% and 3.5% of the portfolio, respectively.

Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS and SF CDOs with underlying exposure to subprime RMBS. Since November 2007, approximately 59.2% of the portfolio has been downgraded, with 10.3% of the portfolio currently on Rating Watch Negative.

The collateral deterioration has caused each of the class A-2, A-3, and B OC tests and the class C interest diversion test to fall below 100% and fail their respective triggers. The failures of these tests are diverting interest proceeds that would otherwise be payable to the class A-3, B and C notes, to pay down class A-1S1 notes. Consistent with the current ratings, Fitch expects the class A-3, B and C notes to receive only capitalized interest payments in the future with no ultimate principal recovery.

The classes are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date.

The ratings of the class A-1S1, A-1S2, A-1J and A-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class A-3, B and C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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