Fitch Affirms Porter Square CDO III, Ltd.

NEW YORK -- Fitch affirms 5 classes of notes issued by Porter Square CDO III, Ltd. (Porter Square III). These affirmations are the result of Fitch's review process.

The following rating actions are effective immediately:

--$240,000,000 class A-1 Senior Secured Floating Rate Notes affirm at 'AAA';

--$56,000,000 class A-2 Senior Secured Floating Rate Notes affirm at 'AAA';

--$48,000,000 class B Senior Secured Floating Rate Notes affirm at 'AA';

--$14,000,000 class C Mezzanine Secured Deferrable Floating Rate Notes affirm at 'A';

--$22,000,000 class D Mezzanine Secured Deferrable Floating Rate Notes affirm at 'BBB'

Porter Square III is a collateralized debt obligation (CDO) that closed October 25, 2005 and is managed by TCW Asset Management Company. Porter Square III has a portfolio composed of 36% CDOs and 64% residential mortgage backed securities (RMBS). Porter Square III has a three-year substitution period during which the collateral manager can trade defaulted, equity, credit risk, credit improved securities and any other security that can be replaced with an equal or better credit quality asset, up to 20% of the portfolio.

Fitch's affirmations are the result of stable collateral quality and improved credit enhancement. The weighted average rating factor has improved to 4.8 ('BBB/BBB-') as of the most recent trustee report dated October 31, 2006 from 5 ('BBB/BBB-') as of the effective date, January 23, 2006. The overcollateralization (OC) and interest coverage (IC) ratios have remained stable since close and are all above their trigger levels. As of the most recent trustee report available, there were no defaulted assets in the portfolio. Assets rated 'BBB-' or lower represented approximately 28.73% of the total portfolio.

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 ratings of the class C and class D 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 legal final maturity date.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on Fitch's 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.