Fitch Places 28 Tranches in 8 REIT TruPS CDOs on Rating Watch Negative

NEW YORK, NY-- Fitch Ratings has placed 28 classes in eight collateralized debt obligations (CDOs) backed primarily by trust preferred securities (TruPS) and subordinated debt issued by real estate investment trusts (REITs), homebuilders, and specialty finance companies (collectively REIT TruPS CDOs) on Rating Watch Negative.

Fitch's rating actions are the result of a combination of deterioration of principal and interest coverage for some transactions and negative portfolio credit migration in other transactions.

Principal coverage has deteriorated primarily through defaults while debt exchanges and defaults were responsible for interest coverage deterioration.

Three of the eight REIT TruPS CDOs placed on Rating Watch are currently failing senior overcollateralization (OC) or interest coverage (IC) tests.

Negative credit migration has resulted from rating downgrades, defaults and deferrals. For the eight CDOs with notes placed on Rating Watch, on average 9.8% of their portfolios has been downgraded since January 2009.

Between January and July 2009, Fitch has observed 22 unique issuers restructure or exchange their debt across these eight Fitch-rated REIT TruPS CDOs. On average, nearly 17.3% of the portfolios have undergone an exchange, which have resulted in an average increase in portfolio notional of $4.1 million. At the same time, the weighted average coupon (WAC) for these portfolios decreased from an average of 6.5% to 4.9% while the weighted average spreads (WAS) decreased from an average of 2.5% to 2.3%.

Issuers that participated in the exchanges have shadow ratings centered in the 'CCC' category. Resolution of the current Rating Watch Negative status will consider the potential implications of observed defaults, expectations for further debt exchanges undertaken by the asset manager and additional ratings downgrades.

For a complete list of Fitch's actions, please contact:

Johann Juan +1-312-368-3339, Derek Miller +1-312-368-2076,

Chicago; or Kevin Kendra +1-212-908-0670, New York.

Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com
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