Fitch Downgrades $390.7MM & Affirms $180MM of Pyxis ABS CDO 2006-1 Ltd.

NEW YORK -- Fitch downgrades five classes and affirms one class of notes issued by Pyxis ABS CDO 2006-1, Ltd, (Pyxis 2006-1). The following rating actions are effective immediately:

--$180,000,000 class A-1 variable funding notes affirmed at 'AAA';

--$113,500,000 class A-2 notes downgraded to 'AA' from 'AAA', and placed on Rating Watch Negative;

--$93,500,000 class B notes downgraded to 'A' from 'AA', and placed on Rating Watch Negative;

--$89,000,000 class C notes downgraded to 'BBB' from 'A', and remain on Rating Watch Negative;

--$39,176,000 class D notes downgraded to 'BB+' from 'BBB', and remain on Rating Watch Negative;

--$55,513,929 class X notes downgraded to 'BB' from 'BBB-', and placed on Rating Watch Negative.

On July 12, 2007, the class C and class D notes were placed on Rating Watch Negative due to the negative migration of subprime residential mortgage-backed securities (RMBS).

Pyxis 2006-1 is a collateralized debt obligation (CDO) that closed Oct. 3, 2006 and is managed by The Putnam Advisory Company, LLC. Pyxis 2006-1 has a revolving portfolio composed of subprime RMBS (91.8%) and CDO (8.2%). Currently, 19.4% of the assets in the portfolio are cash securities and 80.6% are synthetic reference assets. Pyxis 2006-1 will exit its reinvestment period in October 2011, unless cumulative losses in the portfolio exceed $82.5 million, which would terminate the reinvestment period early. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities.

The downgrades to the class A-2, class B, and class C notes are a result of the combination of increased risk in the portfolio of assets and the lack of coverage test protection until October 2011. Since the effective date trustee report dated Jan. 19, 2007, approximately 26% of the portfolio has experienced negative credit migration. The weighted average rating factor has increased to 6.78 ('BBB/BBB-') according to the Aug 6., 2007 trustee report, from 5.18 ('BBB/BBB-') at the effective date, and is failing its maximum threshold of 6. During this period, the three overcollateralization (OC) ratios have decreased due to haircuts applied to securities rated 'BBB-' or lower. The OC covenants are not effective until October 2011, therefore if any OC ratio decreases below its respective covenant within the next five years, excess spread will continue to redeem the class D and class X notes according to their payment schedules rather than divert to redeem the more senior classes.

The downgrades to the class D and class X notes are due to their subordinate position in the capital structure. Though they will continue to amortize from excess spread proceeds until at least October 2011, the long-term outlook for the two classes is no longer consistent with their previous ratings.

The class A-1 notes are affirmed due to the credit enhancement provided by the tranches below it in the capital structure.

The class A-2, class B and class X notes have been placed on Rating Watch Negative and the class C and class D notes remain on Rating Watch Negative due to exposure to 2005 and 2006 RMBS subprime collateral, currently experiencing high default and delinquency rates, of which a substantial percentage have not been reviewed by any agency. Fitch expects to resolve the Rating Watch status on these notes as the expected performance of these bonds is more apparent.

The rating of the class A-1 notes addresses the likelihood that investors will receive full and timely payments of interest and commitment fees on the drawn and unfunded amounts, respectively, as well as the aggregate outstanding amount of principal of any drawn amounts by the stated maturity date. The ratings of the class A-2 and class B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated 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 aggregate outstanding amount of principal by the stated maturity date. The rating of the class X notes addresses the likelihood that investors will receive the ultimate payment of class X rated interest, as per the governing documents, as well as the ultimate return of the scheduled class X target principal amount, as per the governing documents, by the stated maturity date.

This rating analysis also incorporated Fitch's revised methodology for rating structured finance CDOs. For more information, see 'Global Criteria Change for U.S. Structured Finance CDOs Reflects Heightened Subprime Risks,' dated Aug. 15, 2007 and available on the Derivative Fitch website at www.derivativefitch.com.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Derivative Fitch web site at www.derivativefitch.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Oct. 18, 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.