Fitch Rates Pembridge Square Finance Limited Notes.

NEW YORK -- Fitch has assigned ratings to Pembridge Square Finance Limited floating-rate credit-linked notes, which were issued on Oct. 19, 2006, as follows:

-- EUR17,000,000 class A1 due 2041 'AAA';

-- EUR80,000,000 class A2 due 2041 'AAA';

-- EUR70,000,000 class B due 2041 'AA+';

-- EUR60,000,000 class C due 2041 'AA';

-- EUR50,000,000 class D due 2041 'AA-';

-- EUR40,000,000 class E due 2041 'A';

-- EUR25,000,000 class F due 2041 'A-';

-- EUR22,000,000 class G due 2041 'BBB';

-- EUR16,000,000 class H due 2041 'BB+';

Pembridge Square Finance Limited (Pembridge Square or the issuer) is a fully managed synthetic CDO that references a EUR2.0 billion diversified portfolio. The portfolio consists of primarily investment grade corporate obligations referenced via direct investments (50% of the total referenced amount) and through 10 inner tranche credit default swaps (35% of the total referenced amount) as well as of various investment grade ABS (15% of the total referenced amount). The transaction is designed to provide credit protection for realized losses on the reference portfolio through a master credit default swap (CDS) between the issuer and the swap counterparty, KBC Investments Cayman Islands V, Ltd. (KBC). The legal maturity date of the CDS is January 2041, but this trade is scheduled to amortize on or after January 2017. The rating of the notes addresses the likelihood that investors will receive full and timely payments of interest and ultimate receipt of principal by the scheduled maturity date.

Pembridge Square provides protection to the swap counterparty via a CDS that is collateralized with the issuance proceeds of the notes. The issuer will enter into a guaranteed investment contract (GIC) agreement with KBC Investments Hong Kong Limited (guaranteed by KBC Bank NV), which will allow it to redeem collateral at the purchase price of the principal amounts on the maturity date. Under the GIC agreement, the issuer will pay to the GIC counterparty an amount equal to the net proceeds of issuance of the notes to be used for the purchase of the collateral.

Pembridge Square pays the swap counterparty for any losses due to credit events experienced in the portfolio above the first loss amount for each class up to the balance on the notes by liquidating collateral. Any reference obligations in the portfolio can be traded at the discretion of the portfolio swap counterparty, KBC, subject to trading guidelines and portfolio criteria restrictions. While KBC bears no fiduciary responsibility to noteholders, the capital structure of the transaction aligns interests of the portfolio manager with those of the investors through an exclusively subordinate management fee and equity holdings, among other features.

The ratings are based upon the structure of the issuer, the financial strength and abilities of KBC as the portfolio swap counterparty, and KBC Bank NV as GIC guarantor.

Fitch will monitor the performance of this transaction. Deal information and historical data on Pembridge Square are available on the Fitch web site 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.