Fitch Downgrades 1 & Removes 2 Classes of Mulberry Street CDO II, Ltd./Corp. from Watch Negative.

NEW YORK -- Fitch downgrades one class and removes from Rating Watch Negative two classes of notes issued by Mulberry Street CDO II Ltd./Corp. (Mulberry Street II). The following rating actions are effective immediately:

--$27,693,650 class A-1U notes affirmed at 'CCC' and removed from Rating Watch Negative;

--$73,500,000 class A-2 notes downgraded to 'C' from 'CC' and removed from Rating Watch Negative;

--$4,142,000 class B-F notes remain at 'C';

--$39,745,985 class B-V notes remain at 'C';

--$7,383,250 class C notes remain at 'C'.

The downgrade is a result of collateral deterioration within the portfolio, specifically in subprime residential mortgage-backed securities.

Mulberry Street II is a cash flow structured finance (SF) collateralized debt obligation (CDO) that closed on June 26, 2003 and is managed by Clinton Group, Inc. Based on par values from the Aug. 5, 2008 trustee report, defaulted securities comprise 27.9% of the portfolio. An event of default notice was sent to noteholders on April 28, 2008 as a result of the class A-1 overcollateralization (OC) ratio dropping below 102%. As of the Aug. 5, 2008 trustee report, the class A-1 OC ratio was 90.2%.

Following the occurrence of an Event of Default, all principal and interest proceeds have been redirected to pay timely interest due to the class A-1A, A-1B, A-1U and A-1W notes, followed by the reduction of the principal balances of such classes until paid in full. As a result of this redirection, the class A-2 notes are no longer receiving timely interest payments and are not expected to receive future principal repayments.

The class A-1A, A-1B and A-1W notes benefit from a financial guaranty insurance policy provided by MBIA Insurance Corp. (MBIA). The ratings of these classes of notes were withdrawn by Fitch on June 26, 2008, concurrent with Fitch's withdrawal of the insurer financial strength rating of MBIA. The ratings of the class A-1U and A-2 notes address the timely receipt of scheduled interest payments and the ultimate receipt of principal as per the transaction's governing documents. The ratings on the class B-F, B-V and C notes address the ultimate receipt of interest payments and ultimate receipt of principal as per the transaction's governing documents.

Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are available on the Fitch Ratings web site at www.fitchratings.com.

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.