Fitch Downgrades Four Classes of MWAM CBO 2001-1 Ltd.

NEW YORK -- Fitch Ratings affirms one class and downgrades four classes of notes issued by MWAM CBO 2001-1 Ltd. (MWAM), and removes all classes from Rating Watch Negative as follows:

-- $152,338,255 class A notes affirmed at 'AAA';

-- $21,875,000 class B notes downgraded to 'BBB-' from 'A-';

-- $12,803,837 class C-1 notes downgraded to 'B-' from 'BB';

-- $8,494,363 class C-2 notes downgraded to 'B-' from 'BB-';

-- $10,500,000 preference shares downgraded to 'CC' from 'B-'.

MWAM is a collateralized debt obligation (CDO) managed by Metropolitan West Asset Management which closed Jan. 24, 2001. MWAM is composed of residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), asset-backed securities (ABS), CDOs, investment grade corporates and U.S. government securities. 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 to measure the breakeven default rates for the rated liabilities. As a result of this analysis, Fitch has determined that the current ratings assigned to the classes B and C notes and the preference shares no longer reflect the current risk to noteholders.

Since the last rating action in May 2004, the collateral quality has deteriorated. The weighted average rating factor has increased to 28 ('BBB-/BB+') from 22 ('BBB-'). The class A overcollateralization (OC) ratio, classes B OC and C OC ratios have decreased to 122.0%, 106.7%, and 95.1%, respectively, as of May 31, 2005 trustee report, from 123.1%, 110.8%, and 101.3% as of Feb. 29, 2004. On the Jan. 31, 2005 payment date, the class A IC test and the classes B and C OC tests were failing, causing the classes C-1 and C-2 notes to miss their coupon payments. The diverted interest proceeds were used to redeem the class A notes, and the missed coupon payments were capitalized, increasing the outstanding balance of the classes C-1 and C-2 notes. Because the deal is currently failing its class C OC test as well as each of its interest coverage (IC) tests, it is likely that the class C notes will not receive their coupon payment on the July 2005 payment date. Additionally, collateral rated 'BB+' or lower represents 27.7% of the current portfolio, including a large concentration in both the manufactured housing and aircraft leasing sectors.

The ratings assigned to the classes A and B notes address the timely payment of interest and ultimate payment of principal by the stated maturity date. The rating assigned to the class C notes addresses the ultimate payment of interest and principal by the stated maturity date. The rating assigned to the preference shares addresses the ultimate payment of principal plus the ultimate payment of a cash flow equivalent of a contingent annual coupon of 2%.

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 Collateralised Debt Obligations,' dated Sept. 13, 2004, available on Fitch's web site at www.fitchratings.com.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.