Fitch Downgrades 4 Classes of Bayberry Funding, Ltd.

NEW YORK--(Business Wire)--
Fitch downgrades and removes from Rating Watch Negative four
classes of notes issued by Bayberry Funding, Ltd. (Bayberry). The
following rating actions are effective immediately:

--$95,365,636 class II notes downgraded to 'CC' from 'BBB';

--$85,431,715 class III notes downgraded to 'CC' from 'BBB-';

--$17,662,959 class IV notes downgraded to 'C' from 'BB';

--$42,183,899 class V notes downgraded to 'C' from 'B-'.

Fitch's rating actions reflect the significant collateral
deterioration within the portfolio, specifically subprime residential
mortgage-backed securities (RMBS).

Bayberry is a structured finance (SF) collateralized debt
obligation (CDO) that closed on Feb. 15, 2006 and is managed by
Rabobank International. Presently, 85.6% of the portfolio is comprised
of U.S. subprime RMBS, of which 43.1% was issued in 2005.

Since Nov. 21, 2007, approximately 59.2% of the portfolio has been
downgraded with 1.8% of the portfolio currently on Rating Watch
Negative. Additionally, 63.3% of the portfolio is now rated below
investment grade, of which 34.2% of the portfolio is rated 'CCC+' or
below.

The collateral deterioration has caused each of the
overcollateralization (OC) ratios to fall below 100% and fail their
respective tests. As of the trustee report dated July 10, 2008, the
senior OC ratio was 88.8%, relative to its trigger of 108.3%. Since
March 2008, the class IV and V notes have been paying in kind, whereby
the principal balances of the notes are written up by the amount of
unpaid interest. Based on the projected performance of the portfolio,
Fitch does not expect the class IV and V notes to receive any interest
or principal proceeds going forward.

The ratings of the class II and III notes address the timely
receipt of scheduled interest payments and the ultimate receipt of
principal as per the transaction's governing documents. The ratings of
the class IV and V notes address the ultimate receipt of interest
payments and ultimate receipt of principal as per the transaction's
governing documents.

Fitch is reviewing its SF CDO approach and will comment separately
on any changes and potential rating impact at a later date. 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.

Fitch Ratings
Brian Vorderbrueggen, 212-908-9102, New York
Alina Pak, 312-368-3184, Chicago
or
Media Relations:
Julian Dennison, +44 020 7682 7480, London
Sandro Scenga, 212-908-0278, New York

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