Fitch Affirms Kodiak CDO I, LTD./INC.

NEW YORK -- Fitch affirms 12 classes of notes issued by Kodiak CDO I, Ltd./Inc. (Kodiak I). The following rating actions are effective immediately:

--U.S. $323,500,000 class A-1 first priority senior secured floating rate notes at 'AAA';

--U.S. $103,500,000 class A-2 second priority senior secured floating rate notes at 'AAA';

--U.S. $83,000,000 class B third priority senior secured floating rate notes at 'AA';

--U.S. $30,000,000 class C fourth priority secured deferrable floating rate notes at 'AA';

--U.S. $13,000,000 class D-1 fifth priority secured deferrable fixed/floating rate notes at 'AA-';

--U.S. $5,000,000 class D-2 fifth priority secured deferrable fixed/floating rate notes at 'AA-';

--U.S. $29,000,000 class D-3 fifth priority secured deferrable floating rate notes at 'AA-';

--U.S. $5,000,000 class E-1 sixth priority secured deferrable floating rate notes at 'A';

--U.S. $29,000,000 class E-2 sixth priority secured deferrable floating rate notes at 'A';

--U.S. $7,000,000 class F seventh priority secured deferrable floating rate notes at 'BBB+';

--U.S. $50,000,000 class G eighth priority secured deferrable floating rate notes at 'BBB';

--U.S. $27,000,000 class H ninth priority secured deferrable floating rate notes at 'BB+'.

Kodiak I is managed by Kodiak Capital Management Company (Kodiak Capital Management) and has recently completed its ramp-up period. Fitch's affirmations are based on the transaction's satisfaction of required performance covenants. During its ramp-up period, Kodiak I experienced temporary overcollateralization (OC) test failures due to certain shadow rating downgrades, by Fitch, of trust preferred securities issued by subprime mortgage lenders in the portfolio. The assets in question were downgraded to such a level that excluded them from the performing pool, causing the OC test failures. Kodiak Capital Management proposed, and subsequently executed a plan to sell one of the distressed assets out of the CDO in order to avoid an effective date ratings confirmation failure and early wind down. The combination of this sale and Fitch's upgrade of the shadow ratings of other distressed assets has resulted in Kodiak I passing its OC covenants as of the effective date.

The ratings of the class A-1, A-2 and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the stated maturity date. The ratings for the class C, D, E-1, E-2, E-3, F-1, F-2, G and H notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the stated maturity date. The portfolio is fully ramped with a total performing collateral balance of $706.9 million. The notes have a stated maturity of August 2037 and periodic payments on the notes will be paid on a quarterly basis.

The notes are supported by the cash flows of a static portfolio consisting of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts (REITs), real estate operating companies (REOCs) and homebuilders, as well as senior REIT debt securities and commercial mortgage-backed securities (CMBS). Of the total portfolio, approximately 67% are trust preferred securities and subordinated debt, approximately 28% are senior REIT debt securities and 5% are CMBS. The collateral was selected and is monitored by Kodiak CDO Management LLC (Kodiak CDO Management), which is managed solely by Kodiak Capital Management LLC. Kodiak Capital Management LLC is a joint venture between The Bear Companies and Harbor Asset Management. This is the first CDO managed by Kodiak CDO Management.

As part of the rating process for this transaction, Fitch stressed the underlying asset portfolio with a variety of default rates, timing scenarios, and interest-rate scenarios, designed to simulate varying economic conditions. This included modeling the cash flows under middle-, front-, and back-loaded default stress scenarios. The majority of the trust preferred securities included in the KODIAK I portfolio are unrated. Fitch used a hybrid approach to analyze the portfolio. This analysis included a combination of trust preferred criteria used by Fitch's Financial Institutions and Insurance groups and Fitch's VECTOR model analytics.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Derivative Fitch web site at www.derivativefitch.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Oct. 4, 2006 and also available on Fitch's web site at www.derivativefitch.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.derivativefitch.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 means Fitch, Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd. and any successor or successors thereto.