Fitch Downgrades 2 Classes from Oak Canyon Funding; Resolves Negative Rating Watch.

NEW YORK -- Fitch Ratings has downgraded the following 2 classes of notes and removed them from Rating Watch Negative. The following rating actions are effective immediately:

Herald Limited/TCW Oak Canyon Funding

--EUR 3,000,000 Series 23 Tranche D notes due 2012 to 'BBB-' from 'AA'

Iridal Public Limited Company/TCW Oak Canyon Funding

--EUR 3,000,000 Tranche B notes due 2012 to 'A' from 'AAA'

The actions reflect Fitch's view on the credit risk of the rated notes following the release of its new Corporate CDO rating Criteria.

The portfolio has experienced negative rating migration, resulting in an average portfolio quality of 'BBB/BBB-' compared to 'BBB+/BBB' on the October 2007 review date and 'A-/BBB+' on the closing date in January and March of 2005 for Herald and Iridal, respectively. Since the notes were placed on Rating Watch Negative in May 2008, 16.1% of the portfolio has experienced further downgrades.

Key drivers of this transaction's credit risk include portfolio migration risk, with 10.1% of the portfolio currently on Rating Watch Negative, and 14.4% of the portfolio with a Negative Outlook. Fitch also notes the industry concentration of 35.2% in the underperforming sector of banking & finance, including a 0.4% exposure to Residential Capital LLC (IDR rated 'D' by Fitch).

Given Fitch's view of concentration and the current credit quality of the portfolio, the 5.3% and 6.5% credit enhancement levels for Herald and Iridal, respectively are not sufficient to justify the previous ratings of the notes.

Fitch's rating action commentary on the Rating Watch Negative status (dated May 14, 2008) indicated a possible downgrade to the 'BBB' category and 'A' category for Herald and Iridal, respectively if there were no significant changes prior to a resolution of the Watch status. In this case, no changes to the portfolio have been executed. Fitch also notes that the trading flexibility of the manager is limited due to the effects of a Discretionary Trading Lock Out and a decline in the Trading Reserve Accounts. As of the June 30th, 2008 trustee report, the Trading Reserve Accounts for Herald and Iridal have decreased to EUR 21,836 and EUR 5,318 from their original levels of EUR 52,500 and EUR 30,000 respectively.

Oak Canyon Funding Herald Series 23 and Iridal are both partially funded synthetic collateralized debt obligations (CDOs) referencing the same portfolio of 137 primarily investment grade corporate obligations. At close, proceeds from the issuance of the notes were used to collateralize the credit default swaps (CDS) between the issuer and Royal Bank of Canada (RBC, rated 'F1+/AA'; Outlook Stable by Fitch), as the swap counterparty. The portfolio is managed by TCW Asset Management Company. The transactions have a scheduled termination date of March 20, 2012. The ratings of the notes address the likelihood that investors will receive full and timely payments of interest and ultimate receipt of principal by the scheduled maturity date.

Fitch released updated criteria on April 30, 2008 for Corporate CDOs and, at that time, noted it would be reviewing its ratings accordingly to establish consistency for existing and new transactions. As part of this review, Fitch makes standard adjustments for any names on Rating Watch Negative or with a Negative Outlook, lowering such ratings for default analysis purposes by two and one notch, respectively. Fitch has previously noted that its review will be focused first on ratings most exposed to risks it has highlighted in its updated criteria. Consequently, the notes were placed on Rating Watch Negative on May 14, 2008. As previously indicated, resolution of the Negative Watch status depends on any plans managers/arrangers may choose to modify either the structure or the portfolio. In this case, as noted above, the manager confirmed that no modifications took place.

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.