Fitch Downgrades 6 Classes from ACA ABS 2003-1, Limited

Business Wire, July 28, 2008

NEW YORK -- Fitch downgrades and removes from Rating Watch Negative six classes of notes issued by ACA ABS 2003-1, Limited (ACA ABS 2003-1). The following rating actions are effective immediately:

--$59,264,512 Class A-R Notes downgraded to 'CCC' from 'BB' and removed from Rating Watch Negative;

--$155,569,344 Class A-T Notes downgraded to 'CCC' from 'BB' and removed from Rating Watch Negative;

--$30,000,000 Class A-M Notes downgraded to 'CC' from 'B ' and removed from Rating Watch Negative;

--$15,000,000 Class B Notes downgraded to 'CC' from 'B' and removed from Rating Watch Negative;

--$29,000,000 Class C Notes downgraded to 'C' from 'CCC' and removed from Rating Watch Negative;

--$17,995,395 Class D Notes downgraded to 'C' from 'CC' and removed from Rating Watch Negative.

ACA ABS 2003-1 is a cash flow structured finance (SF) collateralized debt obligation (CDO) that closed on May 20, 2003 and was managed by ACA Management, LLC until April 2008, when management duties were transferred to Solidus Capital, LLC. Presently 45.9% of the portfolio is comprised of 2005, 2006 and 2007 vintage U.S. subprime residential mortgage-backed securities (RMBS), and 2.1% is comprised of 2005 and 2006 vintage U.S. Alternative-A (Alt-A) RMBS.

Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS. Since November 21, 2007, approximately 57.6% of the portfolio has been downgraded with 4.7% of the portfolio currently on Rating Watch Negative. 56.7% of the portfolio is now rated below investment grade, including 48.3% of the portfolio rated 'CCC ' and below. Fitch notes that, overall, 52.9% of the assets in the portfolio now carry a rating below the rating it assumed in November 2007. The negative credit migration experienced since the last review on November 21, 2007 has resulted in the Weighted Average Rating Factor deteriorating to 56 from 22, breaching its covenant of 16, as of the latest trustee report dated June 3, 2008.

The collateral deterioration has caused each of the overcollateralization (OC) tests to fall below 100% and fail their respective triggers. As of the latest trustee report the class A/B OC ratio was 86.4%, the class C OC ratio was 78.3%, and the class D OC ratio was 73.8%. As a result of the coverage test failures, the transaction is currently diverting interest proceeds from the class C and class D notes, instead using these proceeds to redeem class A-T and class A-R principal, pro rata. Interest distributions owed to the class C and class D notes are currently being deferred.

The ratings on the class A-R, class A-T, class A-M, and class B notes address the timely receipt of scheduled interest payments and the ultimate receipt of principal as per the transaction's governing documents. The ratings on the class C and class D notes address the ultimate receipt of interest payments and ultimate receipt of principal as per the transaction's governing documents.

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.