Fitch Downgrades 1 & Affirms 4 Classes of Eastman Hill Funding I, Ltd.

CHICAGO -- Fitch Ratings downgrades one class of notes issued by Eastman Hill Funding I, Ltd. (Eastman Hill). The following rating actions are effective immediately:

--$322,506,937 class A-1-FL notes affirmed at 'AA';

--$6,298,964 class A-1-FX notes affirmed at 'AA';

--$328,805,900 class A-2 notes affirmed at 'AA';

--$10,000,000 class A-3 notes affirmed at 'BBB';

--$28,053,787 class B-1 notes downgraded to 'CCC' from 'B';

--$24,777,732 subordinated preference shares remain at 'C';

--$25,000,000 combination securities remain at 'CC'.

E[acute accent]Eastman Hill is a collateralized debt obligation (CDO) which closed on July 2, 2001 and is managed by TCW Investment Management Company. Eastman Hill is composed of 58% High Grade, 30% RMBS, 7% High Yield and 5% Bank loans. 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. E[acute accent]This downgrade reflects the decline in the coverage ratios since last review. The class A-1 overcollateralization test has declined to 108.7%, as of the latest trustee report dated Dec. 28, 2005, from 109.4%, as of the Oct. 29, 2004 trustee report, below its trigger level of 109.0%, and the class A-1 interest coverage test has declined to 81.1% from 84.1%, below its trigger level of 115.0%. The weighted average rating factor remained at its trigger level of 20 or 'BBB-'. The percentage of assets below 'CCC+' remained stable at 4.8%, below its trigger level of 5.0%. In addition, principal is being used to pay interest on the class A notes in the amount of $1.1 million as of the Jan. 3, 2006 distribution date and the class B-1 notes have capitalized over $4 million in interest since the closing date. E[acute accent]The ratings of the classes A1-FL, A1-FX, and A-3 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 A-2 notes addresses the likelihood that investors will receive full and timely payments of interest on scheduled interest payment dates. This rating does not address any distribution of principal. The rating of the class B-1 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 ratings of the combination notes and the subordinated preference shares address the likelihood that investors will receive their stated balance of principal by the legal final maturity date. E[acute accent]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 at www.fitchratings.com.

E[acute accent]Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.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.