Fitch Downgrades 4 classes of MKP CBO I.

NEW YORK -- Fitch has downgraded 4 classes of notes issued by MKP CBO I, Ltd. (MKP I), which closed Feb. 8, 2001. The following rating actions are effective immediately:

--$128,027,436 class A-1L notes downgraded to 'B' from 'BBB-';

--$25,000,000 class A-2L notes downgraded to 'CC' from 'CCC';

--$7,375,000 class B-1A notes downgraded to 'C' from 'CC';

--$7,000,000 class B-1L notes downgraded to 'C' from 'CC'.

MKP I is a collateralized debt obligation (CDO) managed by MKP Capital Management, LLC. The portfolio supporting the CDO is comprised of residential mortgage-backed securities, commercial mortgage-backed securities, and commercial and consumer asset-backed securities.

Included in this review, Fitch Ratings discussed the current state of the portfolio with the collateral manager and their portfolio assumptions and 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. As a result of this analysis, Fitch has determined that the current ratings assigned to each class of notes no longer reflect the current risk to noteholders.

The downgrades of the notes are a result of further deterioration of the credit quality of the collateral pool and the continued use of collateral principal to pay fees and interest on the subordinate notes. Since the last rating action on May 4, 2005, the class A overcollateralization (OC) ratio has decreased to 96.5% as of the Feb. 28, 2006 trustee report, from 100.3% as of the March 28, 2005 trustee report. The class B OC ratio has also decreased to 88.7% from 94.3% over the same time period. The erosion of collateral coverage on the notes has stemmed from two major factors-?the use of principal to pay unpaid interest on the class B notes, and the faster than expected principal write-downs of 6 collateral securities. Since the March 8, 2005 payment date, approximately $1.4 million of principal proceeds have been used to pay class B interest and unpaid fees, and a total of approximately $7 million of collateral par value has been written down. This collateral erosion has created the possibility that the class A-1L notes may sustain a partial principal loss over the life of the transaction, though recovery prospects will be very substantial. The remaining classes of notes are expected to sustain significant par losses with minimal likelihood of receiving future principal distributions. The class B notes are expected to continue to receive their scheduled interest distributions from principal proceeds as long as there remains enough principal cash to cure the class A OC test in the principal waterfall.

The ratings of the class A-1L and A-2L 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 ratings of the class B-1A and Class B-1L notes address 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.

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 Collateralized Debt Obligations,' dated Sept. 13, 2004, and also available 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.