Fitch Rates Emporia Preferred Funding I, Ltd.

NEW YORK -- Fitch Ratings assigns the following ratings to Emporia Preferred Funding I, Ltd.:

-- $280,140,000 class A delayed draw first priority senior floating-rate notes, due Oct. 12, 2018 'AAA';

-- $36,615,000 class B-1 second priority senior floating-rate notes, due Oct. 12, 2018 'AA';

-- $5,000,000 class B-2 second priority senior fixed-rate notes, due Oct. 12, 2018 'AA';

-- $24,360,000 class C third priority subordinated deferrable floating-rate notes, due Oct. 12, 2018 'A';

-- $24,360,000 class D fourth priority subordinated deferrable floating-rate notes, due Oct. 12, 2018 'BBB';

-- $8,000,000 class E-1 fifth priority subordinated deferrable floating-rate notes, due Oct. 12, 2018 'BB';

-- $5,195,000 class E-2 fifth priority subordinated deferrable fixed-rate notes, due Oct. 12, 2018 'BB'.

The ratings are based upon the credit quality of the underlying assets, the credit enhancement provided to the capital structure through subordination and excess spread, and the strength of Emporia Capital Management LLC. as asset manager to the portfolio assets.

The ratings of the class A, B-1, and B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the Oct. 12, 2018 legal final maturity date. The ratings of the classes C, D, E-1, and E-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balances of notes C, D, E-1, and E-2 principal by the Oct. 12, 2018 legal final maturity date.

The notes are supported by the cash flow of an asset portfolio consisting of middle market senior secured loans and broadly syndicated senior secured and second lien loans. The majority of the borrowers operate in the lodging and restaurants; food, beverage, and tobacco; industrial/manufacturing, building, and materials; and business services industries.

The expected portfolio will consist of 70% middle market senior secured loans, 15% are broadly syndicated senior secured loans, with the remaining 15% invested in second lien loans. The portfolio, which is 50% ramped at close, has a maximum Fitch weighted average rating factor of 34.5 ('B/B-'). The expected pool will have 72 obligors representing 83 senior loans, with no single obligor representing more than 3% of the total portfolio value.

During the six year reinvestment period, principal collections may be used to reinvest in additional collateral. The reinvestment collateral must meet minimum standards outlined in the portfolio criteria. Within the reinvestment period the collateral manager may elect to pay down notes in order of seniority via a special amortization if the collateral manager cannot locate additional collateral that meets the reinvestment criteria within 30 days. By electing a special amortization the collateral manager may elect to designate all or a portion of principal collections for payment of the notes in order of seniority.

During or after the reinvestment period the asset manager may make discretionary sales up to 20% of the aggregate principal amount per annum, subject to certain rating criteria. The asset manager must reinvest the proceeds from the sale within 30 days during the reinvestment period. The proceeds may be used to purchase substitute collateral with a principal balance equal to the amount that was sold assuming investment criteria are satisfied.

The portfolio criteria will include the following tests: the maximum weighted average rating factor, maximum weighted average life, minimum weighted average spread, and coupon tests. This transaction also features an interest diversion test that diverts interest to add collateral during the reinvestment period, or thereafter, to pay down notes in reverse sequential order.

As part of the rating process for this transaction, Fitch stressed the underlying asset portfolio with a variety of default and interest rate scenarios, designed to simulate varying economic conditions. In addition, to address the revolving feature of this transaction Fitch stressed the portfolio to certain worst case parameters including WARF, weighted average spread, weighted average coupon, and weighted average life. For further details on the stress tests Fitch employed while rating Emporia Preferred Funding I, Ltd., see the presale report, 'Emporia Preferred Funding I, Ltd. (US CDO),' dated Sept. 15, 2005, available on the Fitch Ratings web site at www.fitchratings.com.

For more information on the Fitch vector model, see 'Global Rating Criteria for Collateralized Debt Obligations,' dated Sept. 13, 2003, and also available at 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.