Fitch Affirms Pacific Bay CDO, Limited.

CHICAGO -- Fitch Ratings affirms five classes of rated notes issued by Pacific Bay CDO, Limited (Pacific Bay). The following rating actions are effective immediately:

-- $315,000,000 class A-1 first priority senior secured floating rate notes affirmed at 'AAA';

-- $64,000,000 class A-2 second priority senior secured floating rate notes affirmed at 'AAA';

-- $36,000,000 class B third priority senior secured floating rate notes affirmed at 'AA';

-- $12,689,634 class C mezzanine secured floating rate notes affirmed at 'BBB';

-- $17,000,000 preference shares affirmed at 'BB-'.

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 legal final maturity date. The rating of the class C notes addresses 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 legal final maturity date. The rating of the preference shares addresses the ultimate payment of a 2% yield per annum on the preference share rated balance as well as the preference share rated balance by the legal final maturity date.

Pacific Bay is a collateralized debt obligation (CDO), which closed in November 2003. The portfolio consists of 66.5% residential mortgage-backed securities (RMBS), 13.7% commercial mortgage-backed securities (CMBS), 11.8% asset-backed securities (ABS), 4.7% corporate securities and 3.3% CDOs. Fitch reviewed the credit quality of the individual assets comprising the portfolio and discussed the transaction's performance with Pacific Investment Management Company LLC, the collateral manager.

According to the trustee report dated Oct. 29, 2004, the overcollateralization (OC) tests, interest coverage tests, Fitch weighted average rating factor (WARF) test, and other performance tests are passing their required levels. Additionally, the portfolio contains no defaulted securities and 1.3% of securities are rated below 'BBB-'. Due to a structural feature which caps interest distributions to the preference shares at 14% per annum and amortizes the class C notes with the excess, the class C notes have paid down by over 25%. This de-leveraging of the class C notes has increased the credit enhancement available to the class C notes. Fitch believes that the credit protection has remained at appropriate levels to maintain the ratings for each of the rated notes.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at www.fitchratings.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, also available on the Fitch Ratings web site at www.fitchratings.com.