Fitch IBCA Downgrades Lehman/T&W Equip Lease Securitizations.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 8, 2000

Fitch IBCA downgrades the following classes of securities as follows:

-- Lehman Receivables III LLC, T&W lease-backed notes, series

1998-A class A notes are downgraded from 'AAA' to 'AA'. The

class B notes are downgraded from 'BB' to 'B'.

-- Lehman Receivables IV LLC, T&W lease-backed notes, series

1998-B class A notes are downgraded from 'AAA' to 'AA-'. The

class B notes are downgraded from 'BBB' to 'BB-'.

-- T&W Funding Company XII, LLC, T&W lease-backed notes, series

1999-A class A notes are downgraded from 'AAA' to 'AA'. The

class B notes are downgraded from 'BBB' to 'BB-'.

In addition, all classes of notes remain on RatingAlert Negative pending further information.

These rating actions reflect the dramatic deterioration of asset quality in these transactions and the resulting loss of credit enhancement. In particular, Fitch IBCA is most concerned about a series of large, non-performing asset concentrations. Based on discussions with the servicer, Fitch IBCA has learned that the underlying collateral for a number of these concentrations is inconsistent with the original representations made to us about the type of collateral included in these transactions. In addition, because certain of the collateral is actually master leased to bankrupt or financially strapped Canadian entities, some related or affiliated with T&W, as opposed to directly leased to end users as was originally represented, there have been delays in payment to the trust. As a result of these delays combined with the collateral deficiencies, it is possible that loss severities could be significantly higher than originally anticipated.

Fitch IBCA first put these transactions on RatingAlert on Jan. 5, 2000 when asset quality issues first emerged and performance triggers were hit, which resulted in a trapping of cash and turbo payment of senior notes. Effective Feb. 7, 2000 servicing was transferred from T&W Financial Inc. to Finova Portfolio Services, a subsidiary of Finova Capital Corp. (rated 'BBB+/F2' by Fitch IBCA). On Feb. 8, 2000, Fitch IBCA downgraded the class B bonds in all three transactions and maintained RatingAlert Negative on all classes. While Fitch IBCA believes that the transfer of servicing has been a positive development, concerns remain over the nature and quality of the underlying assets as noted above. Finova appears to be taking the proper steps in identifying the problem accounts and resolving some of the cross-border Canadian transactions.

Further ratings actions are possible based on the results of the resolution of several problem accounts. Fitch IBCA believes it is likely that the credit enhancement provided by the retained interest and residuals will continue to diminish. Fitch IBCA will continue to closely monitor the situation through discussions with the servicer, trustee and banker and will inform investors of any further developments.

Please see the Duff & Phelps press release for corresponding Duff & Phelps rating changes or contact Jeff Orr at 1-312-368-3335 or Joe Tuczak at 1-312-368-2083 in Chicago.