Fitch Rates ALESCO Preferred Funding VIII, Ltd.

CHICAGO -- Fitch Ratings assigns the following ratings to ALESCO Preferred Funding VIII, Ltd. and ALESCO Preferred Funding VIII, Inc. (ALESCO VIII, or the co-issuers) as listed below:

--$110,000,000 class A-1A first priority senior secured floating-rate notes due 2035 'AAA';

--$255,000,000 class A-1B first priority delayed draw senior secured floating-rate notes due 2035 'AAA';

--$70,000,000 class A-2 second priority senior secured floating-rate notes due 2035 'AAA';

--$50,000,000 class B-1 deferrable third priority secured floating-rate notes due 2035 'AA';

--$5,000,000 class B-2 deferrable third priority secured fixed/floating-rate notes due 2035 'AA';

--$78,500,000 class C-1 deferrable fourth priority mezzanine secured floating-rate notes due 2035 'A';

--$7,500,000 class C-2 deferrable fourth priority mezzanine secured fixed/floating-rate notes due 2035 'A';

--$12,000,000 class C-3 deferrable fourth priority mezzanine secured fixed/floating-rate notes due 2035 'A';

--$18,000,000 class D-1 deferrable fifth priority subordinate secured floating-rate notes due 2035 'BBB';

--$4,500,000 class D-2 deferrable fifth priority subordinate secured fixed/floating-rate notes due 2035 'BBB';

--$14,500,000 class E deferrable sixth priority subordinate secured floating-rate notes due 2035 'BBB-'.

The ratings on the class A-1A, A-1B, and A-2 notes address the likelihood that investors will receive timely payment of interest and ultimate payment of the original principal amount by the stated maturity date. The ratings on the class B-1, B-2, C-1, C-2, C-3, C-4, C-5, D-1, D-2, and E notes address the likelihood that investors will receive ultimate payment of cumulative interest and ultimate payment of the original principal amount of the respective notes by the stated maturity date. The class A-1B notes will be delayed-drawn whereby approximately 27% of these notes are issued at closing. Periodic payments on the notes will be paid quarterly starting on Dec. 23, 2005.

ALESCO VIII, a bankruptcy-remote special-purpose corporation, is secured by a $667 million diversified portfolio of newly issued and secondary market trust preferred securities and subordinated debentures of bank and thrift holding companies (67%) and trust preferred securities, subordinated debentures, surplus and senior notes of small and midsized U.S. insurance companies (33%). The portfolio is diversified geographically across seven defined regions. The portfolio is also diversified by obligor, with the largest obligor concentration at 3% of the portfolio principal balance. The issuers will have 90 days from the closing date to ramp-up the portfolio to the target portfolio amount of $667 million; the portfolio will be approximately 74% ramped at close. During the substitution period, which lasts four years after the ramp-up completion date, the collateral manager may substitute up to 20% of the original portfolio with substitute securities, subject to certain eligibility criteria.

The ratings are based on the capital structure of the transaction, the quality of the collateral, the overcollateralization (OC) and interest coverage (IC) provided for within the indenture, as well as the strength and experience of Cohen Bros. Financial Management, LLC, as collateral manager. The two OC tests and two IC tests will trap cash to bring themselves back into compliance any time they fail their required levels. Cash trapped through any OC or IC test failure will be used to pay down the most senior notes outstanding first. ALESCO VIII is subject to a mandatory auction call redemption by a majority of the preference shareholders starting in June 2015 where the portfolio of securities would be auctioned and the sale proceeds used to pay off the notes in their entirety.

The placement agent for this transaction is Merrill Lynch, Pierce, Fenner & Smith Incorporated. For additional information on structural and others features of ALESCO VIII, including a reserve account, a de-leveraging feature, and an auction call, please see the Fitch presale report, dated July 27, 2005, "ALESCO Preferred Funding VIII, Ltd./Inc.," which is available on the Fitch Ratings subscription-based web site, www.fitchresearch.com.

For more information on Fitch's approach to rating CDOs of trust preferred securities, see the special report, "Rating Criteria for U.S. Bank and Insurance Trust Preferred CDOs," dated Feb. 2, 2005, also available on Fitch's web site, 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.