Fitch Affirms Lakeside Funding LLC's SLNs Program at 'F1+' Following Extension.

NEW YORK -- Fitch Ratings affirms the 'F1+' rating of Lakeside Funding LLC's (Lakeside or the Issuer) secured liquidity notes (SLNs). This rating affirmation follows the Aug. 8, 2007 notification of extension of the SLNs to their legal final maturity date of Aug. 8, 2008. The rating of the SLNs continues to be based on the high credit quality assets held by Lakeside, the put agreement and basis swap agreement provided by AIG Financial Products (AIG-FP), whose payment obligations are absolutely and unconditionally guaranteed by American International Group, Inc. (rated 'AA/F1+' by Fitch), and other structural protections afforded through the program structure.

Lakeside is a bankruptcy-remote, special purpose Delaware limited liability company established to originally issue up to $624.0 million of SLNs. The proceeds from the SLN issuance was used to purchase all outstanding U.S. $624,000,000 class A-1 first priority senior secured notes (class A-1 notes) issued by Lakeside CDO I, Ltd. and Lakeside CDO I, Inc. which are managed by the collateral manager, Vanderbilt Capital Advisors, LLC. The class A-1 notes are rated 'AAA' by Derivative Fitch, and have a legal final maturity of Dec. 7, 2039. The class A-1 notes are the only assets owned Lakeside. Since Lakeside's December 2003 launch, the underlying class A-1 notes have amortized and the current program outstandings are approximately $380.36 million.

The SLNs have a legal final maturity date of 12 months after the month of the issuance date. The SLNs pay interest monthly in arrears on the 8th day of each calendar month equal to LIBOR plus a spread, each such date being a payment date or a maturity date. The SLNs are extendible by the Issuer on each monthly payment or maturity date. Under typical market conditions, the Issuer intends to repay maturing SLNs on their respective maturity dates, from the proceeds from the reissuance of new SLNs. As in this case, the inability of Lakeside to pay maturing SLNs, as a result of not being able to issue sufficient replacement SLNs in the aggregate principal amount of the maturing SLNs, below a maximum acceptable spread, results in the SLNs being extended, at which point they are called extended notes. Upon the extension, the extended notes step up to a predetermined interest rate of Libor + 30 bps until the next monthly maturity date, at which point the issuer would again attempt to issue SLNs to repay the extended notes. Following an initial extension, if Lakeside is unable to issue replacement SLNs on any subsequent monthly maturity date, including the legal final maturity date, it results in the original investors having to hold the SLNs until their one year legal final maturity date.

Lakeside has entered into a put agreement with AIG-FP to facilitate the payment of the extended notes on the third day following the exercise of the put which would occur on the legal final maturity date. In the event that Lakeside is unable to reissue new SLNs to repay maturing extended notes on their legal final maturity date, Lakeside is entitled under the put agreement to sell, and the put counterparty is obligated to purchase, subject to certain conditions, either the class A-1 notes or the related extended notes. The proceeds received by the Issuer from the put counterparty would be used to pay the principal amount due on the extended notes, while the basis swap agreement, discussed below, would cover the interest component due. The exercise of the put agreement is conditioned upon, among other things, no event of default having occurred relating to a default in the payment of interest or principal on the class A-1 notes, and that the put counterparty has received a note valuation report, which states that sufficient funds are available to pay the interest on the class A-1 notes, no later than two business prior to the extended notes scheduled maturity date. It should be noted that in the event the put counterparty does not receive a Note Valuation Report, the put would still be exercisable if the class A-1 notes Issuers have made full interest payments on the related quarterly distribution date. AIG is required to support the repayment of the extended notes by their legal final maturity date so long as the underlying class A-1 notes continue to perform, the likelihood of which is reflected in their 'AAA' rating.

Lakeside has entered into a basis swap agreement with AIG-FP, to enable it to meet the monthly interest payments on the SLNs and extended notes. Under the basis swap Lakeside receives from AIG-FP, scheduled monthly payments computed by reference to a notional principal amount (equal to the outstanding principal amount of the related SLNs or extended notes) multiplied by an interest rate based on one month LIBOR plus a spread. In return, Lakeside pays to AIG-FP scheduled quarterly payments computed by reference to such notional principal amount multiplied by an interest rate based on three-month LIBOR plus a spread, which corresponds to the interest payments expected to be received by Lakeside on the financed class A-1 notes.

Deutsche Bank Trust Company Americas (DBTC) and Deutsche International Corporate Services (Delaware) LLC (DICS) serve as the program's administrator and the Delaware administrator, respectively. In these roles DBTC and DICS are responsible for performing certain corporate management and administrative services for the Issuer. DBTC also serves as the program's custodian, collateral agent, and issuing and paying agent. Merrill Lynch Money Markets Inc. serves as the program's placement agent.

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.