Fitch Rates ALESCO Preferred Funding XI, Ltd./Inc.

NEW YORK -- Fitch assigns the following ratings to ALESCO Preferred Funding XI, Ltd./Inc. (ALESCO XI):

-- $174,000,000 Class A-1A first priority senior secured floating-rate notes due 2036 'AAA';

-- $176,000,000 Class A-1B first priority delayed draw senior secured floating-rate notes due 2036 'AAA';

-- $95,000,000 Class A-2 second priority senior secured floating-rate notes due 2036 'AAA';

-- $55,000,000 Class B deferrable third priority secured floating-rate notes due 2036 'AA';

-- $40,500,000 Class C-1 deferrable fourth priority mezzanine secured floating-rate notes due 2036 'A-';

-- $12,000,000 Class C-2 deferrable fourth priority mezzanine secured fixed/floating-rate notes due 2036 'A-';

-- $50,500,000 Class C-3 deferrable fourth priority mezzanine secured fixed-rate notes due 2036 'A-';

-- $ 34,000,000 Class D deferrable fifth priority subordinate secured floating-rate notes due 2036 'BBB';

The ratings on the Class A-1A, Class A-1B and Class 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, Class C-1, Class C-2, Class C-3 and Class D 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. Periodic payments on the notes will be paid quarterly starting in September 2006.

ALESCO XI, a bankruptcy-remote special-purpose corporation, will be secured by a $667.1 million diversified portfolio containing 67.0% newly issued and secondary market trust preferred securities of bank and thrift holding companies and 33.0% trust preferred and surplus note securities of small and midsized U.S. insurance companies. The portfolio of bank and thrift holding companies is diversified geographically across seven Fitch defined regions, with the largest region constituting 38.9% of the portfolio. The portfolio is also diversified by obligor, with the largest obligor concentration at 3.0% of the portfolio principal balance. ALESCO XI will have 180 days from the closing date to ramp-up the portfolio to the target portfolio amount. The portfolio will be approximately 87.24% ramped at close. During the four year substitution period, the collateral manager may reinvest principal proceeds from sales of securities in substitute collateral. Such substitution is limited to 10% per year over the four-year period, excluding any sale of defaulted, credit-risk, or equity securities.

The ratings are based on the capital structure of the transaction, the quality of the collateral, as well as the strength and experience of Cohen Bros. Financial Management, LLC (Cohen), as the collateral manager. Cash trapped through the Class A OC or IC test failure will be used to pay down the most senior notes outstanding, while cash trapped through the Class B/C/D OC or IC test failure will be used to pay down the class B, C, and D notes on a pro rata basis. ALESCO XI is subject to mandatory auction call redemption by a majority of the preference shareholders starting on June 23, 2016 where the portfolio of securities would be auctioned and the sale proceeds used to pay off the notes in their entirety.

For additional information on structure and others features of ALESCO XI please see the Fitch Presale report, 'ALESCO Preferred Funding XI, Ltd./Inc.', which is available on the Fitch Ratings web site, 'www.fitchratings.com'.

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