Fitch Downgrades 6 Classes from Ipswich Street CDO, Ltd./LLC

Business Wire,  May 2, 2008  

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NEW YORK -- Fitch downgrades and removes from Rating Watch Negative six classes of notes issued by Ipswich Street CDO, Ltd./LLC (Ipswich Street). The following rating actions are effective immediately:

--$1,528,551,908 Class A-1 Notes downgraded to 'CCC' from 'BBB-' and removed from Rating Watch Negative;

--$60,000,000 Class A-2 Notes downgraded to 'CC' from 'BB' and removed from Rating Watch Negative;

--$62,000,000 Class B Notes downgraded to 'CC' from 'BB-' and removed from Rating Watch Negative;

--$25,393,543 Class C Notes downgraded to 'C' from 'B-' and removed from Rating Watch Negative;

--$9,650,486 Class D Notes downgraded to 'C' from 'CCC' and removed from Rating Watch Negative;

--$8,302,774 Class E Notes downgraded to 'C' from 'CC' and removed from Rating Watch Negative.

Ipswich Street is a collateralized debt obligation (CDO) that closed on June 27, 2006 and is managed by Massachusetts Financial Services Company (MFS). Presently 53.2% of the portfolio is comprised of 2005, 2006 and 2007 vintage U.S. subprime residential mortgage-backed securities (RMBS), 6.5% consists of 2005, 2006 and 2007 vintage U.S. structured finance (SF) CDOs and 3.4% is comprised of 2005, 2006 and 2007 vintage U.S. Alt-A RMBS.

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 21, 2007, approximately 52.7% of the portfolio has been downgraded with 11.9% of the portfolio currently on Rating Watch Negative. 38.3% of the portfolio is now rated below investment grade. Fitch notes that, overall, 27.3% 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 11.38 from 2.55, breaching its covenant of 1.45, as of the March 31, 2008 trustee report.

The collateral deterioration has caused each of the class A/B, class C and class D overcollateralization tests, class A Sequential Pay test and class E interest diversion tests to fall below 100% and fail their respective triggers. The failures of these tests are diverting interest proceeds to attempt to cure the tests and therefore exhausting remaining interest proceeds before the class C, class D, and class E interest payments are made. Fitch expects these classes to receive only capitalized interest payments in the future with no ultimate principal recovery.

The ratings of the classes A-1, A-2, and B 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 aggregate outstanding amount of principal by the stated maturity date. The ratings of the class C, D, and E notes address the likelihood that investors will receive ultimate and compensating interest payments, as well as the aggregate outstanding amount of principal by the stated maturity date, pursuant to the transaction's governing documents. The ratings are based upon the capital structure of the transaction, the quality of the collateral, and the protections incorporated within the structure.

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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