Fitch Downgrades Rutland Rated Investments - Rumson 2007-2 (Series 42); Resolves...

Fitch Downgrades Rutland Rated Investments - Rumson 2007-2 (Series 42); Resolves Negative Watch

NEW YORK--(Business Wire)--
Fitch Ratings has downgraded the following tranche of Rutland
Rated Investments Rumson 2007-2 (Series 42) (Rumson 2007-2) and
removed the notes from Rating Watch Negative. The following rating
action is effective immediately:

--US$25,000,000 tranche A1-L1 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 'A-/BBB+' at the
closing date in March 2007. Since the notes were placed on Rating
Watch Negative in May 2008, 8.7% of the portfolio has experienced
further downgrades. In addition, 9.2% 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 15, 2008) indicated a possible downgrade to the 'A'
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 21 obligors with
14 obligors (approximately 7.2% of the portfolio) of higher credit
quality. However, key drivers of credit risk remained relatively
unchanged, as the portfolio has experienced further downgrades,
causing the overall credit profile on the notes to remain in the 'A'
category.

Key drivers of this transaction's credit risk include portfolio
migration risk, with 5.6% of the portfolio currently on Rating Watch
Negative, compared to 8.5% in May 2008, and 18% of the portfolio with
a Negative Outlook, compared to 17.5% in May 2008. Fitch also notes
the industry concentration of 28.7% in the underperforming sector of
banking & finance, as well as a 0.5% exposure to XL Capital Assurance
Inc (IFS rated 'CCC').

Given Fitch's view of concentration and the current credit quality
of the portfolio, the 4.1% credit enhancement level for Rumson 2007-2
is not sufficient to maintain the previous rating of the notes.

Rumson 2007-2 is a static synthetic collateralized debt obligation
(CDO) referencing a $2 billion portfolio of 195 equally weighted,
primarily investment grade corporate obligations. The transaction is
designed to assume credit risk for realized losses on the reference
portfolio through a credit default swap (CDS) between the issuer and
the swap counterparty, Bear Stearns Credit Products Inc., whose
obligations are guaranteed by The Bear Stearns Companies Inc. (rated
'AA-/F1+').

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 15, 2008. As previously indicated, resolution of
the Negative Watch 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
Derek Miller, +1-312-368-2076 (Chicago)
Aaron Hughes, +1-312-368-2074 (Chicago)
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)

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