Fitch Downgrades Calhoun CBO Ltd./Corp.

NEW YORK -- Fitch downgrades the ratings on the senior notes issued by Calhoun CBO Ltd./Corp, (Calhoun).

The following rating actions are effective immediately:

--$134,701,925 senior notes downgraded to 'B+' from 'BB-';

--$79,722,632 second priority notes revised to 'C/DR5' from 'C/DR4'.

Calhoun is a collateralized bond obligation (CBO) that closed July 23, 1998 and is managed by RiverSource Investments, LLC (fka American Express Asset Management Group, Inc). Calhoun exited its reinvestment period in July 2003 and has a portfolio primarily composed of high yield bonds, with 23% invested in emerging markets bonds. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio 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 the structure is able to withstand going forward relative to the minimum cumulative default rates required for the rated liabilities.

The downgrade reflects Calhoun's increased exposure to long dated assets in the portfolio, interest rate sensitivities and continued failure of the overcollateralization (OC) and interest coverage (IC) tests. Although the trustee report dated as of January 16, 2007 indicated slight improvement in collateral credit quality and increased credit enhancement to the senior notes due to note amortization since the trustee report dated April 23, 2004, the exposure to long-dated assets increased to 15.6% from 5.5% of the total portfolio balance. The increased exposure to long-dated assets poses a risk to the rated notes in that the long-dated assets must be sold by the legal final maturity date in order to redeem the rated note balances, thereby exposing noteholders to market value risk. In addition, the deal's interest rate exposure is underhedged, which could negatively impact net interest proceeds generation in a rising interest rate environment. As of the trustee report dated January 16, 2007, senior and second priority OC tests were failing at 121.17% and 76.12%, relative to triggers of 127.50% and 104.00%, respectively. The senior and second priority IC tests were also failing at 135.89% and 82.25%, relative to triggers of 145% and 120%, respectively. The OC tests have been failing since March 2001, and the IC tests have been failing since April 2002.

The rating of the senior 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 second priority senior notes addresses 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 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 on Fitch's web site at www.derivativefitch.com.

Fitch's Distressed Recovery (DR) ratings, introduced in April 2006 across all sectors of structured finance, are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money. For more information on Distressed Recovery ratings, see the full report ('Structured Finance Distressed Recovery Ratings'), which is 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.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.