Fitch Downgrades Elva Funding PLC Series No: 2008-5

Business Wire, Oct 14, 2008

NEW YORK -- Fitch Ratings downgrades Elva Funding PLC Series No: 2008-5 (Elva 2008-5) as follows:

--COP54,558,000,000 fixed rate notes due 2018, to 'A' from 'AA-'.

The Rating Outlook remains Negative.

The downgrade of Elva 2008-5 is based on Fitch's downgrade of Morgan Stanley to 'A' from 'AA-'on Oct. 13, 2008. The rating assigned by Fitch to Elva 2008-5 is based on the credit quality of Morgan Stanley as guarantor to the swap counterparty and as the collateral issuer.

Elva 2008-5 (the issuer) issued the above fixed rate, credit linked notes in the principal amount of Columbian Peso (COP) 54,558,000,000 on July 18, 2008. The issuance proceeds were used to purchase U.S. Dollar (USD) 30,000,000 of the 6 5/8% Notes due 1 April 2018, issued by Morgan Stanley (ISIN: US6174466Q77).

At closing, the issuer entered into a swap with Morgan Stanley Capital Services Inc. (the swap counterparty) that converts USD-denominated interest and principal payments from the collateral into amounts based on COP54,558,000,000, which are then converted back to USD. Payments from the swap counterparty to the issuer are converted into USD at the then-prevailing value of the COP/USD exchange rate, as per the transaction's governing documents.

The rating of the notes addresses the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the ultimate payment of principal by the legal final maturity date. All payments are made in USD, as stated above.

If a Mandatory Redemption Event occurs, as defined in the governing documents, investors may be exposed to the market value risk of the collateral due to its liquidation prior to maturity, and also foreign exchange risk upon conversion of the USD-based collateral proceeds into COP.

Note that Fitch's rating addresses the likelihood of default of the 6 5/8% Notes due April 1, 2018, issued by Morgan Stanley, or of Morgan Stanley as guarantor to the swap counterparty. Fitch's rating does not address the magnitude of losses upon default. These losses may include without limitation any termination payments payable by the Issuer, any market value losses upon early liquidation of the collateral, and any potential losses due to conversion of the USD-based collateral will be converted into COP upon early termination.

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.