Fitch Downgrades 2 & Affirms 2 Classes of Blue Heron Funding V, Ltd.

NEW YORK -- Fitch downgrades two and affirms two classes of notes issued by Blue Heron Funding V, Ltd., (Blue Heron V). The following rating actions are effective immediately:

--$455,000,000 Class A-1 Notes downgraded to 'F1' from 'F1+';

--$455,000,000 Class A-2 Notes downgraded to 'F1' from 'F1+';

--$85,000,000 Class B Notes affirmed at 'A-';

--$5,000,000 Certificates affirmed at 'AAA'.

Blue Heron V is a collateralized debt obligation (CDO) that closed Feb. 21, 2003 and is managed by Westdeutsche Landesbank Girozentrale (WestLB), New York Branch. Blue Heron V is supported by a revolving portfolio composed of residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) and CDOs. Blue Heron V will exit its reinvestment period in February 2008.

Class A-1 notes receive short-term funding by remarketing every year. Class A-2 notes have a five year maturity but can be tendered every six months. In the event that class A-1 notes cannot be remarketed below their maximum remarketing spread covenant of 1%, the put counterparty for the transaction will be required to fund the notes at the maximum spread. In case of the funds in the remarketing account being insufficient to pay the tender price of class A-2 notes, such payments will have to be covered by the put counterparty. The downgrades on the class A-1 and A-2 notes are the result of a previous downgrade of West LB AG's short term rating to 'F1' from 'F1+'. The ratings of the class A-1 and A-2 notes are linked to that of Blue Heron V's credit and liquidity provider. Credit and liquidity support are provided to Blue Heron V in the form of a put option agreement with WestLB. One of Fitch's requirements for the A-1 and A-2 notes to maintain their original rating is that the put option provider (or replacement) be rated 'F1+'.West LB AG remains the put counterparty, no credit guaranty has been obtained and no collateral has been posted to remedy the situation.

Since the last rating action on June 19, 2006 the collateral has continued to perform as expected. As of the March 19, 2007 trustee report the Fitch weighted average rating factor was 1.7 ('AAA'/'AA+'), and remains below its maximum threshold of 2.33 ('AA/AA-'). Overcollateralization (OC) and interest coverage (IC) ratios continue to meet their corresponding covenants. There have not been any defaulted or distressed assets in the portfolio to date.

The ratings of the class A-1 and A-2 notes addresses 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 B notes address the likelihood that investors will receive the stated balance of principal by the legal final maturity date. The rating of the Certificates is based on the principal protection provided by treasury strips and addresses the likelihood that investors will receive their 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 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. 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.