Fitch Affirms TABERNA Preferred Funding III, Ltd.

CHICAGO -- Fitch affirms 10 classes of notes issued by TABERNA Preferred Funding III, Ltd. (TABERNA III). These affirmations are the result of Fitch's review process and are effective immediately:

-- $398,500,000 class A-1A notes affirmed at 'AAA';

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

-- $38,500,000 class A-2A notes affirmed at 'AAA';

-- $15,000,000 class A-2B notes affirmed at 'AAA';

-- $91,250,000 class B-1 notes affirmed at 'AA';

-- $7,500,000 class B-2 notes affirmed at 'AA';

-- $36,500,000 class C-1 notes affirmed at 'A';

-- $52,000,000 class C-2 notes affirmed at 'A';

-- $43,750,000 class D notes affirmed at 'BBB';

-- $31,500,000 class E notes affirmed at 'BB+.

TABERNA III is a collateralized debt obligation (CDO) that closed September 29, 2005 and is managed by TABERNA Capital Management, LLC. TABERNA III has a static portfolio composed of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts (REITs), real estate operating companies, homebuilders and a publicly rated specialty finance company, as well as senior REIT debt securities and commercial mortgage-backed securities (CMBS). Of the total portfolio, approximately 90% are trust preferred securities and subordinated debt, approximately 7% are senior REIT debt securities and 3% are CMBS.

Since close, the collateral has continued to exhibit stable performance. The class A/B, C, D and E overcollateralization (OC) ratios have remained stable at 133.75%, 115.52%, 108.23% and 103.52%, respectively versus their triggers at 120.25%, 110.42%, 105.23% and 101.02%, respectively. Structural features included a delayed draw mechanism for the class A-1B notes. In February 2006, the $210.0 million class A-1B delayed draw notes were converted to class A-1A notes and added to the existing $188.5 million balance of the class A-1A notes. As the class A-1A and class A-1B ranked pari passu with respect to principal and interest payments, the conversion did not impact the transaction's capital structure or the ratings assigned by Fitch to the issued liabilities.

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