Fitch Affirms TABERNA Preferred Funding II, Ltd.

CHICAGO -- Fitch affirms 12 classes of notes issued by TABERNA Preferred Funding II, Ltd. (TABERNA II). These affirmations are the result of Fitch's review process and are effective immediately:

--$400,000,000 class A-1A notes affirmed at 'AAA';

--$106,500,000 class A-1B notes affirmed at 'AAA';

--$10,000,000 class A-1C notes affirmed at 'AAA';

--$86,500,000 class A-2 notes affirmed at 'AAA';

--$120,500,000 class B notes affirmed at 'AA';

--$73,750,000 class C-1 notes affirmed at 'A';

--$26,000,000 class C-2 notes affirmed at 'A';

--$15,000,000 class C-3 notes affirmed at 'A';

--$31,250,000 class D notes affirmed at 'A-';

--$30,259,765 class E-1 notes affirmed at 'BBB';

--$10,167,281 class E-2 notes affirmed at 'BBB';

--$42,500,000 class F notes affirmed at 'BB+'.

TABERNA II is a collateralized debt obligation (CDO) that closed June 28, 2005 and is managed by TABERNA Capital Management, LLC. TABERNA II has a static portfolio composed of trust preferred securities issued by subsidiaries of real estate investment trusts (REITs) and real estate operating companies, senior REIT debt securities, and commercial-mortgage-backed securities (CMBS). Of the total portfolio, approximately 88% are REIT trust preferred securities, approximately 3% are CMBS, and approximately 9% are senior REIT debt securities.

Since close, the collateral has continued to exhibit stable performance. The class A/B, C and D overcollateralization (OC) ratios have remained stable at 138.22%, 119.30% and 115.01%, respectively versus their triggers at 128%, 113% and 110.5%, respectively. The class E and class F OC ratios have improved to 109.8% from 109.7% and 104.9% from 104.8%, respectively due to pay down of class E-1 and E-2 notes through an equity cap feature of the deal.

The ratings of the class A-1A, A-1B, A-1C, 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-1, C-2, C-3, D and E-1, E-2 and F 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 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.