Fitch Places Various Notes of Tropic CDO I-IV, Soloso CDO 2005-1 and 2007-1 on Rating Watch Negative.

NEW YORK -- Fitch Ratings has placed various notes issued by Tropic CDO I, Tropic CDO II, Tropic CDO III, Tropic CDO IV, Soloso CDO 2005-1 and 2007-1 (the collateralized debt obligations, or CDOs) on Rating Watch Negative. Fitch's rating actions follow notification of an offer by Trust Preferred Solutions, LLC (TPS) to purchase certain collateral debt securities in each of the six CDOs totaling $355.8 million for a price of $17.8 million in aggregate, or 5% of the par amount. Additionally, TPS has offered the preferred shareholders a consent payment equal to 5% of the par amount of each security.

A similar offer was made by TPS in connection with Tropic CDO V for $115 million of collateral debt securities for $5.75 million with a $5.75 million consent payment. On Oct. 19, 2009, Fitch placed seven notes of Tropic V on Rating Watch Negative. In connection with today's actions, Fitch is placing 34 of the 38 notes issued from these six CDOs on Rating Watch Negative to reflect the potential impact to Fitch's ratings if the TPS offer is accepted. A full list of the rating actions is included at the end of the rating commentary for each CDO.

Fitch will resolve the Rating Watch Negative status of the notes pending the outcome of the TPS offer. Should the offer be accepted in full, it is likely that the ratings for a number of tranches in the CDOs will be downgraded to distressed levels of 'CCC' or lower. The following rating commentary summarizes the key factors, on a CDO-specific basis that support Fitch's rating actions on the six affected CDOs:

Tropic CDO I, Ltd. (Tropic I) experienced one default, six deferrals and nine securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $104.4 million, or 37.3% of the portfolio. The weighted average adjusted score for the portfolio was 3.68, which is representative of 'B' credit quality. This is significantly lower than the 2.90 ('BBB-/BB+') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic I was passing its senior overcollateralization (OC) and interest coverage (IC) test triggers at 126.5% and 193.9%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 92.2% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized. Additionally, Fitch projects the loss of approximately $388,186 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-2L notes are expected to remain investment grade, the A-3L notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Tropic I on Rating Watch Negative:

U.S.$90,000,000 Class A-2L 'AA';

U.S.$42,000,000 Class A-3L 'BBB';

U.S.$48,000,000 Class A-4L 'CC';

U.S.$32,000,000 Class A-4 'CC';

U.S.$25,000,000 Class B-1L 'CC'.

Tropic CDO II, Ltd. (Tropic II) experienced three defaults, two deferrals and five securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $66 million, or 20.6% of the portfolio. The weighted average adjusted score for the portfolio was 3.51, which is representative of 'BB-' credit quality. This is slightly lower than the 3.20 ('BB/BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic II was failing its senior OC test trigger but passing its IC test trigger at 106.7% and 213.9%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 73.8% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized.

Additionally, Fitch projects the loss of approximately $840,974 of interest proceeds from these securities each quarter. At the October distribution date, interest proceeds totaled $834,599. If the offer is accepted in its entirety, Fitch expects the A-1L notes to receive interest at the next payment date as the $3.5 million consent payment would be available to pay interest. However, in subsequent payments there is a real possibility that interest proceeds would be insufficient to pay interest on the A-2L notes. If the A-2L notes do not receive full interest payments when due, an Event of Default would occur and Fitch will downgrade the A-2L notes to 'D'. The remaining notes are expected to be downgraded to distressed rating categories, should the offer be accepted in full.

Fitch has placed the following notes from Tropic II on Rating Watch Negative:

--U.S.$121,984,681 Class A-1L 'AA';

--U.S.$50,000,000 Class A-2L 'A';

--U.S.$35,000,000 Class A-3L 'BB';

--U.S.$38,000,000 Class A-4L 'CC';

--U.S.$30,000,000 Class A-4 'CC';

--U.S.$15,000,000 Class B-1L 'CC'.

Tropic CDO III, Ltd. (Tropic III) experienced one default, five deferrals and five securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $74 million, or 22.1% of the portfolio. The weighted average adjusted score for the portfolio was 3.49, which is representative of 'BB-' credit quality. This is slightly lower than the 3.20 ('BB/BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic III was failing its senior OC test trigger but passing its IC test trigger at 122.9% and 285.1%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 87.4% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized.

Additionally, Fitch projects the loss of approximately $559,993 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, the A-2L notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Tropic III on Rating Watch Negative:

--U.S.$121,984,681 Class A-1L 'AA';

--U.S.$50,000,000 Class A-2L 'A'

--U.S.$35,000,000 Class A-3L 'BB';

--U.S.$38,000,000 Class A-4L 'CC';

--U.S.$30,000,000 Class A-4 'CC';

--U.S.$15,000,000 Class B-1L 'CC'.

Tropic CDO IV, Ltd. (Tropic IV) experienced zero defaults, six deferrals and eight securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $96.5 million, or 28.8% of the portfolio. The weighted average adjusted score for the portfolio was 3.60, which is representative of 'BB-/B+' credit quality. This is slightly lower than the 3.40 ('BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic IV was failing its senior OC test trigger but passing its IC test trigger at 123.8% and 342.2%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 90.1% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized.

Additionally, Fitch projects the loss of approximately $562,146 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, the A-2L notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Tropic IV on Rating Watch Negative:

--U.S.$151,984,515 Class A-1L 'AA';

--U.S.$40,000,000 Class A-2L 'A';

--U.S.$37,500,000 Class A-3L 'BBB';

--U.S.$26,000,000 Class A-4L 'CC';

--U.S.$35,000,000 Class A-4 'CC';

--U.S.$20,000,000 Class B-1L 'CC'.

Soloso CDO 2005-1, Ltd. (Soloso 2005-1) experienced three defaults, three deferrals and seven securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $69.9 million, or 13.9% of the portfolio. The weighted average adjusted score for the portfolio was 3.57, which is representative of 'BB-/B+' credit quality. This is lower than the 3.00 ('BB+/BB') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Soloso 2005-1 was passing its senior OC and IC test triggers at 127.0% and 332.1%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 105.8%. Additionally, Fitch projects the loss of approximately $378,640 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, the A-1LA and A-1LB notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Soloso 2005-1 on Rating Watch Negative:

--U.S.$159,302,052 Class A-1L 'AA';

--U.S.$115,616,698 Class A-1LA 'A';

--U.S.$39,000,000 Class A-1LB 'A';

--U.S.$45,500,000 Class A-2L 'BBB';

--U.S.$40,000,000 Class A-3L 'CCC';

--U.S.$19,000,000 Class A-3A 'CCC';

--U.S.$19,000,000 Class A-3B 'CCC';

--U.S.$30,500,000 Class B-1L 'CC'.

Soloso CDO 2007-1, Ltd. (Soloso 2007-1) experienced two defaults, eight deferrals and six securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $115.3 million, or 21.9% of the portfolio. The weighted average adjusted score for the portfolio was 3.59, which is representative of 'BB-/B+' credit quality. This is lower than the 3.20 ('BB/BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Soloso 2007-1 was failing its senior OC test trigger but passing its senior IC test trigger at 124.7% and 227.80%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 112.3%. Additionally, Fitch projects the loss of approximately $569,918 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Soloso 2007-1 on Rating Watch Negative:

--U.S.$256,227,666 Class A-1LA 'A';

--U.S.$83,000,000 Class A-1LB 'BBB';

--U.S.$68,000,000 Class A-2 'CCC'.

Fitch Ratings has placed various notes issued by Tropic CDO I, Tropic CDO II, Tropic CDO III, Tropic CDO IV, Soloso CDO 2005-1 and 2007-1 (the collateralized debt obligations, or CDOs) on Rating Watch Negative. Fitch's rating actions follow notification of an offer by Trust Preferred Solutions, LLC (TPS) to purchase certain collateral debt securities in each of the six CDOs totaling $355.8 million for a price of $17.8 million in aggregate, or 5% of the par amount. Additionally, TPS has offered the preferred shareholders a consent payment equal to 5% of the par amount of each security.

A similar offer was made by TPS in connection with Tropic CDO V for $115 million of collateral debt securities for $5.75 million with a $5.75 million consent payment. On Oct. 19, 2009, Fitch placed seven notes of Tropic V on Rating Watch Negative. In connection with today's actions, Fitch is placing 34 of the 38 notes issued from these six CDOs on Rating Watch Negative to reflect the potential impact to Fitch's ratings if the TPS offer is accepted. A full list of the rating actions is included at the end of the rating commentary for each CDO.

Fitch will resolve the Rating Watch Negative status of the notes pending the outcome of the TPS offer. Should the offer be accepted in full, it is likely that the ratings for a number of tranches in the CDOs will be downgraded to distressed levels of 'CCC' or lower. The following rating commentary summarizes the key factors, on a CDO-specific basis that support Fitch's rating actions on the six affected CDOs:

Tropic CDO I, Ltd. (Tropic I) experienced one default, six deferrals and nine securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $104.4 million, or 37.3% of the portfolio. The weighted average adjusted score for the portfolio was 3.68, which is representative of 'B' credit quality. This is significantly lower than the 2.90 ('BBB-/BB+') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic I was passing its senior overcollateralization (OC) and interest coverage (IC) test triggers at 126.5% and 193.9%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 92.2% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized. Additionally, Fitch projects the loss of approximately $388,186 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-2L notes are expected to remain investment grade, the A-3L notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Tropic I on Rating Watch Negative:

U.S.$90,000,000 Class A-2L 'AA';

U.S.$42,000,000 Class A-3L 'BBB';

U.S.$48,000,000 Class A-4L 'CC';

U.S.$32,000,000 Class A-4 'CC';

U.S.$25,000,000 Class B-1L 'CC'.

Tropic CDO II, Ltd. (Tropic II) experienced three defaults, two deferrals and five securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $66 million, or 20.6% of the portfolio. The weighted average adjusted score for the portfolio was 3.51, which is representative of 'BB-' credit quality. This is slightly lower than the 3.20 ('BB/BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic II was failing its senior OC test trigger but passing its IC test trigger at 106.7% and 213.9%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 73.8% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized.

Additionally, Fitch projects the loss of approximately $840,974 of interest proceeds from these securities each quarter. At the October distribution date, interest proceeds totaled $834,599. If the offer is accepted in its entirety, Fitch expects the A-1L notes to receive interest at the next payment date as the $3.5 million consent payment would be available to pay interest. However, in subsequent payments there is a real possibility that interest proceeds would be insufficient to pay interest on the A-2L notes. If the A-2L notes do not receive full interest payments when due, an Event of Default would occur and Fitch will downgrade the A-2L notes to 'D'. The remaining notes are expected to be downgraded to distressed rating categories, should the offer be accepted in full.

Fitch has placed the following notes from Tropic II on Rating Watch Negative:

--U.S.$121,984,681 Class A-1L 'AA';

--U.S.$50,000,000 Class A-2L 'A';

--U.S.$35,000,000 Class A-3L 'BB';

--U.S.$38,000,000 Class A-4L 'CC';

--U.S.$30,000,000 Class A-4 'CC';

--U.S.$15,000,000 Class B-1L 'CC'.

Tropic CDO III, Ltd. (Tropic III) experienced one default, five deferrals and five securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $74 million, or 22.1% of the portfolio. The weighted average adjusted score for the portfolio was 3.49, which is representative of 'BB-' credit quality. This is slightly lower than the 3.20 ('BB/BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic III was failing its senior OC test trigger but passing its IC test trigger at 122.9% and 285.1%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 87.4% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized.

Additionally, Fitch projects the loss of approximately $559,993 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, the A-2L notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Tropic III on Rating Watch Negative:

--U.S.$121,984,681 Class A-1L 'AA';

--U.S.$50,000,000 Class A-2L 'A'

--U.S.$35,000,000 Class A-3L 'BB';

--U.S.$38,000,000 Class A-4L 'CC';

--U.S.$30,000,000 Class A-4 'CC';

--U.S.$15,000,000 Class B-1L 'CC'.

Tropic CDO IV, Ltd. (Tropic IV) experienced zero defaults, six deferrals and eight securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $96.5 million, or 28.8% of the portfolio. The weighted average adjusted score for the portfolio was 3.60, which is representative of 'BB-/B+' credit quality. This is slightly lower than the 3.40 ('BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Tropic IV was failing its senior OC test trigger but passing its IC test trigger at 123.8% and 342.2%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 90.1% indicating that the A-1L, A-2L and A-3L classes of notes will be undercollateralized.

Additionally, Fitch projects the loss of approximately $562,146 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, the A-2L notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Tropic IV on Rating Watch Negative:

--U.S.$151,984,515 Class A-1L 'AA';

--U.S.$40,000,000 Class A-2L 'A';

--U.S.$37,500,000 Class A-3L 'BBB';

--U.S.$26,000,000 Class A-4L 'CC';

--U.S.$35,000,000 Class A-4 'CC';

--U.S.$20,000,000 Class B-1L 'CC'.

Soloso CDO 2005-1, Ltd. (Soloso 2005-1) experienced three defaults, three deferrals and seven securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $69.9 million, or 13.9% of the portfolio. The weighted average adjusted score for the portfolio was 3.57, which is representative of 'BB-/B+' credit quality. This is lower than the 3.00 ('BB+/BB') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Soloso 2005-1 was passing its senior OC and IC test triggers at 127.0% and 332.1%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 105.8%. Additionally, Fitch projects the loss of approximately $378,640 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, the A-1LA and A-1LB notes are expected to be downgraded to below investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Soloso 2005-1 on Rating Watch Negative:

--U.S.$159,302,052 Class A-1L 'AA';

--U.S.$115,616,698 Class A-1LA 'A';

--U.S.$39,000,000 Class A-1LB 'A';

--U.S.$45,500,000 Class A-2L 'BBB';

--U.S.$40,000,000 Class A-3L 'CCC';

--U.S.$19,000,000 Class A-3A 'CCC';

--U.S.$19,000,000 Class A-3B 'CCC';

--U.S.$30,500,000 Class B-1L 'CC'.

Soloso CDO 2007-1, Ltd. (Soloso 2007-1) experienced two defaults, eight deferrals and six securities were deemed at imminent risk of deferral at Fitch's last review in April 2009. The total combination of actual defaulted, deferring and imminent risk securities totaled $115.3 million, or 21.9% of the portfolio. The weighted average adjusted score for the portfolio was 3.59, which is representative of 'BB-/B+' credit quality. This is lower than the 3.20 ('BB/BB-') credit quality of portfolio securities subject to the TPS offer. As of the latest Trustee report, Soloso 2007-1 was failing its senior OC test trigger but passing its senior IC test trigger at 124.7% and 227.80%, respectively. Fitch projects that if the TPS offer is accepted in full, the OC test will fall to 112.3%. Additionally, Fitch projects the loss of approximately $569,918 of interest proceeds from these securities each quarter. Should this offer be accepted in full, the A-1L notes are expected to remain investment grade, with the remainder of the notes expected to be downgraded to distressed rating categories.

Fitch has placed the following notes from Soloso 2007-1 on Rating Watch Negative:

--U.S.$256,227,666 Class A-1LA 'A';

--U.S.$83,000,000 Class A-1LB 'BBB';

--U.S.$68,000,000 Class A-2 'CCC'.

In addition, the following CDO notes for Soloso CDO 2007-1, Ltd. remain at 'C':

--U.S.$25,000,000 Class A-3F;

--U.S.$40,000,000 Class A-3L;

--U.S.$22,000,000 Class B-1L.

These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:

--'Fitch Revises Criteria for Reviewing U.S. CDOs Backed by Bank & Insurance TruPS' (March 25, 2009);

--'Rating Criteria for U.S. Bank and Insurance Trust Preferred CDOs' (Feb. 2, 2005).

Additional information is available at 'www.fitchratings.com'.

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