Fitch Downgrades Rutland Rated Investments - Hillyer (Series 51); Resolves Negative...

Fitch Downgrades Rutland Rated Investments - Hillyer (Series 51); Resolves Negative Watch

NEW YORK--(Business Wire)--
Fitch Ratings has downgraded the following tranche of Rutland
Rated Investments Hillyer (Series 51) (Hillyer) and removed the notes
from Rating Watch Negative. The following rating action is effective
immediately:

--US$25,000,000 tranche A1-L secured limited recourse
credit-linked notes due 2012 to 'A-' from 'AAA'.

The action reflects Fitch's view on the credit risk of the rated
notes following the release of its new corporate CDO rating criteria.

The portfolio has experienced negative rating migration, resulting
in an average portfolio quality of 'BBB' compared to 'BBB+/BBB' at the
closing date in June 2007. Since the notes were placed on Rating Watch
Negative in May 2008, 10.3% of the portfolio has experienced further
downgrades. In addition, 10.3% of the portfolio carries a rating below
investment grade, up from zero percent at closing.

Fitch's rating action commentary on the Rating Watch Negative
status (dated May 14, 2008) indicated a possible downgrade to the
'BBB' category if there were no significant changes prior to a
resolution of the Watch status. In June 2008, Bear Stearns Credit
Products Inc. (Bear Stearns), as credit default swap (CDS)
counterparty, executed substitutions on the reference portfolio,
replacing 47 obligors with 41 obligors (approximately 28.1% of the
portfolio) of higher credit quality. This action caused the average
portfolio quality to increase from 'BBB/BBB-' to 'BBB', improving the
overall credit profile on the notes to the 'A' category. However, key
drivers of credit risk remained relatively unchanged, as the portfolio
has experienced further downgrades.

Key drivers of this transaction's credit risk include portfolio
migration risk, with 6.9% of the portfolio currently on Rating Watch
Negative, compared to 6% in May 2008, and 21.2% of the portfolio with
a Negative Outlook, compared to 18% in May 2008. Fitch also notes the
industry concentration of 36.3% in the underperforming sector of
banking & finance, as well as a combined 1.4% exposure to Residential
Capital LLC (IDR rated 'D' by Fitch) and XL Capital Assurance Inc (IFS
rated 'CCC' by Fitch).

Given Fitch's view of concentration and the current credit quality
of the portfolio, the 4.9% credit enhancement level for Hillyer
(Series 51) is not sufficient to maintain the previous rating of the
notes.

Hillyer (Series 51) is a static synthetic collateralized debt
obligation (CDO) referencing a $2 billion portfolio of 146 equally
weighted, primarily investment grade corporate obligations. The
transaction is designed to assume credit risk for realized losses on
the reference portfolio through a CDS between the issuer and the swap
counterparty, Bear Stearns, whose obligations are guaranteed by The
Bear Stearns Companies Inc. (rated 'AA-/F1+' by Fitch).

Fitch released updated criteria on April 30, 2008 for corporate
CDOs and, at that time, noted it would be reviewing its ratings
accordingly to establish consistency for existing and new
transactions. As part of this review, Fitch makes standard adjustments
for any names on Rating Watch Negative or with a Negative Outlook,
lowering such ratings for default analysis purposes by two and one
notches, respectively. Fitch has previously noted that its review will
be focused first on ratings most exposed to risks it has highlighted
in its updated criteria. Consequently, the notes were placed on Rating
Watch Negative on May 14, 2008. As previously indicated, resolution of
the Rating Watch Negative status depends on any plans
managers/arrangers may choose to modify either the structure or the
portfolio. In this case, Bear Stearns amended the reference portfolio
as indicated above.

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.

Fitch Ratings, Chicago
Derek Miller, 312-368-2076
Aaron Hughes, 312-368-2074
or
Media Relations:
Sandro Scenga, 212-908-0278, New York

Copyright Business Wire 2008