Fitch Rates GSC ABS CDO 2006-4u, Ltd./Corp.

NEW YORK -- Fitch Ratings has rated the following notes issued by GSC ABS CDO 2006-4u, Ltd. and GSC ABS CDO 2006-4u, Corp. (collectively, GSC 2006-4u):

-- $502,000,000 class A-S1VF senior secured floating rate notes due 2046 'AAA';

-- $85,000,000 class A1 senior secured floating rate notes due 2046 'AAA';

-- $45,000,000 class A2 senior secured floating rate notes due 2046 'AA';

-- $45,000,000 class A3 secured deferrable floating rate notes due 2046 'A';

-- $33,000,000 class B mezzanine secured deferrable floating rate notes due 2046 'BBB';

-- $10,000,000 class C mezzanine secured deferrable floating rate notes due 2046 'BB+'.

The ratings of the class A-S1VF notes, class A1 notes and class A2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The ratings of the class A3, class B and class C notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date.

The ratings are based on the quality of the initial portfolio assets, as well as the credit enhancement provided by support from the preference shares, the excess spread, the GIC account, and the protections incorporated within the structure. During the four year reinvestment period, the collateral manager, GSCP (NJ), LP (GSC Partners), may annually trade up to 15% of the total portfolio balance as well as any credit risk, credit improved, defaulted or equity securities on a discretionary basis.

GSC 2006-4u is a hybrid cash and synthetic arbitrage collateralized debt obligation (CDO). The collateral pool will have a maximum Fitch weighted average rating factor (WARF) of 6.0 ('BBB/BBB-'). With the proceeds of the note issuance and the commitment from the class A-S1VF noteholder, GSC 2006-4u will invest in a $750 million portfolio of combined synthetic and cash securities. Approximately 99% of the collateral will be purchased at close. The expected effective date portfolio will consist of approximately 75% credit default swaps (CDS), primarily referencing residential mortgage-backed securities (RMBS), and approximately 25% cash RMBS, structured finance (SF) CDO cash securities, and commercial real estate (CRE) CDO cash securities.

GSC 2006-4u includes a GIC account which is funded initially and over time from note and cash proceeds, respectively, and a super senior liquidity facility consisting of the $502 million class A-S1VF notes. In the case of any credit events for the CDS contracts, the GIC account will initially be drawn upon to make credit protection payments. After the GIC account has been depleted, the class A-S1VF notes will be drawn upon to make credit protection payments (or for payment in the case of the physical settlement option). The outstanding drawn amount on the class A-S1VF notes receives interest of one-month London Interbank Offered Rate plus 0.32%, while the unfunded class A-S1VF notes will receive an ongoing commitment fee of 0.17%. Also, during the reinvestment period, and after the preference shares have achieved an annualized coupon of 16%, 50% of the remaining interest proceeds will be used to redeem the class B and C notes on a pro rata basis. After the reinvestment period, principal payments will be applied pro rata to the drawn and unfunded class A-S1VF notes and the funded notes until the original collateral balance is 50% paid down or until the failure of a coverage test, after which principal proceeds will be paid sequentially for the remainder of the deal.

The portfolio for GSC 2006-4u will be managed by GSC Partners. Privately owned GSC Partners was established in 1999, and is an SEC registered investment advisor. Total assets under management as of June 30, 2006 were $14.7 billion with $10.2 billion underlying 20 separate CDO transactions (including warehoused assets) issued via GSC Partners' corporate credit and structured finance businesses. The firm describes itself as focused on credit-related alternative investment strategies. In addition to its CDO activities in corporate credit, and structured finance, GSC Partners manages portfolios of control distressed debt, European mezzanine debt, and corporate credit. The firm is staffed by over 160 professionals headquartered in New Jersey, and has offices in New York, London, and Los Angeles.

GSC Partners' structured finance activities are led by Frederick Horton, a GSC senior managing director and former member of TCW responsible for their structured finance CDO activities. Ed Steffelin is COO of the group and head of portfolio management. Daniel Castro, former head of structured finance research at Merrill Lynch, leads the structured finance team's credit research efforts. The structured finance team currently numbers 17 professionals. In addition to its role as collateral manager for GSC Partners' ABS CDO activities, GSC Partners also manages a long/short structured finance hedge fund, and is responsible for the management of the firm's $1.8 billion alternative mortgage REIT, GSC Capital Corp. The REIT will typically hold 100% of the first loss in GSC Partners structured finance CDOs. Day-to-day investment decisions with respect to the CDO are made by a committee consisting of the structured finance team's four senior members.

For more information, see the presale report 'GSC ABS CDO 2006-4u, Ltd.' available on the Fitch Ratings web site at www.fitchratings.com.

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