Fitch Downgrades 10 Classes of LNR CDO VI 2007-2; off Rating Watch Negative.

NEW YORK -- Fitch Ratings has downgraded 10 classes and affirmed two classes of notes issued by LNR CDO VI, series 2007-2 Ltd./LLC, (LNR CDO VI) as follows:

--$142.1 million class A-1 notes affirmed at 'AAA';

--$100 million class A-2 notes affirmed at 'AAA';

--132.6 million class B notes to 'A' from 'AA';

--$150 million class C notes to 'BBB' from 'A+';

--$26 million class D notes to 'BB' from 'A';

--$21.5 million class E notes to 'BB' from 'A-';

--$44.2 million class F notes to 'B' from 'BBB+';

--$28.8 million class G notes to 'B' from 'BBB';

--$24.6 million class H notes to 'B' from 'BBB-';

--$55.3 million class J notes to 'B-' from 'BB+';

--$39.5 million class K preferred shares to 'B-' from 'BB';

--$15.5 million class L preferred shares to 'B-' from 'BB-'.

Additionally, Fitch removed classes A-2 through L from Rating Watch Negative, where they were originally placed on Jan. 16, 2008. Fitch does not rate the preferred shares.

LNR CDO VI is a commercial real estate collateralized debt obligation (CRE CDO) that is primarily backed by commercial mortgage backed securities (CMBS) B-pieces and that closed on Aug. 3, 2007. CMBS B-piece resecuritizations (also referred to as first loss CRE CDOs/ReREMICs) are CRE CDOs and ReREMIC transactions that include the most junior bonds, of CMBS transactions. LNR Partners, Inc. (rated 'CSS1' by Fitch as a commercial mortgage special servicer) selected the initial collateral and serves as the collateral administrator.

The collateral for this CDO consists of high-yielding junior bonds, of CMBS transactions. The underlying assets of the CMBS bonds, by their nature, face similar exposures to losses from any downturn in the commercial real estate market as well as refinancing risks at the assets' maturity dates. As a mitigant, however, the underlying CMBS transactions do have significant geographic, property type and tenant diversity.

While Fitch continues to believe investment grade CMBS will perform well even in a heightened stress environment, the risks facing first loss (unrated) and junior rated bonds, within the capital structure of CMBS transactions have increased with expectations of a rise in commercial real estate defaults from current low levels. Even a relatively modest increase in CRE losses could be material for these portfolios.

In reviewing CRE CDOs, Fitch has targeted expected losses in different rating stresses based on the quality of the underlying CMBS collateral. The overall expected losses reflect the single sector exposure, the concentrated nature of these portfolios, and the low expected recoveries upon bond default, especially for more junior and thinner classes of CMBS tranches. Additional ratings considerations include seasoning of underlying collateral, obligor diversity, actual bond performance and projected losses. The specific credit characteristics that are factored into Fitch's rating review are discussed below.

LNR CDO VI is collateralized by all or a portion of 132 classes of fixed-rate CMBS in 28 separate underlying transactions. All performance and collateral information is based on the March 19, 2008 trustee report and discussions with the collateral administrator. The pool's obligor diversity is considered average for CMBS B-piece resecuritizations, and the vintage distribution of the CMBS collateral consists of the 2006 and 2007 vintages (an average of 1.1 year of seasoning). Approximately 34.4% of the collateral currently is rated below 'B-' or not rated, and therefore, is more susceptible to losses in the near-term. While overall a significant portion of the collateral is below investment grade, approximately 15.1% is investment grade. LNR CDO VI holds 27.2% in the 'BB' category and 23.3% in the 'B' category.

The CDO has neither paid down nor realized any losses since issuance. Losses are projected with $177.1 million of the loans in the underlying CMBS transactions currently 60 days or more delinquent according to the current trustee report.

Fitch conducted cash flow modeling to test the transaction's structure under various default and interest rate stress scenarios. The ratings of the class A-1, A-2, and B notes address the likelihood that investors will receive full and timely payments of interest and the stated balance of principal by the legal final maturity date in accordance with the terms of the governing documents. The ratings on classes C, D, E, F, G, H and J address the likelihood that investors will receive ultimate and compensating interest payments and the stated balance of principal by the legal final maturity date in accordance with the terms of the governing documents. The ratings of the classes K and L preferred shares address the likelihood that investors will receive ultimate payment of the dividend distribution amount and the stated balance of the capital distribution amount by the legal final maturity date in accordance with the terms of the governing documents.

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.