Fitch Ratings Affirms Sigma Finance Following Amendments To Structure.

Business Editors

LONDON--(BUSINESS WIRE)--March 28, 2003

Fitch Ratings, the international rating agency, has affirmed the 'AAA' long-term and 'F1+' short-term senior debt ratings of Sigma Finance Corp. (Sigma). Approximately US$26 billion of U.S. dollar- and Euro-denominated commercial paper (CP) and medium-term notes (MTNs) issued by Sigma and its wholly owned, guaranteed affiliate, Sigma Finance, Inc. are affected. The short- and medium-term debt issued by Sigma is collateralised by a portfolio of bank and asset-backed debt securities. The notional balance of assets in the portfolio is USD29 billion as of 21 March 2003.

This affirmation follows the amendment of the investment management contract and supporting documents between the investment manager, Gordian Knot, and Sigma, which took effect on March 27, 2003. Gordian Knot and Sigma initiated these amendments primarily to provide Sigma with additional flexibility of operation given its size. Fitch was in favour of providing some flexibility to Sigma but felt that the retention of a market value mechanism and the introduction of a potential cessation of debt issuance mechanism was fundamental to the maintenance of the ratings at current levels. It is Fitch's opinion that the cessation of debt provision will serve to limit market losses should a stress of significant severity occur. In its analysis of the amendments, Fitch focused on three major areas: transparency of reporting, operating state definitions, and obligor concentration limits.

Transparency was provided through expanded reporting in the form of weekly and monthly surveillance reports and the annual financials produced for Sigma. The amended reporting that commenced in the last year provided more detail on the individual exposures in the portfolio: the notes in issuance, including their tenor and composition; and the nature of the liquidity providers to the structure. Fitch views this enhanced investor reporting information as an important component in allowing investors to make a more informed decision as to Sigma's debt.

The operating states, outside of compliance with normal market value and other operating triggers that Sigma has now adopted consist of a no growth state, a natural amortisation state and a state which would bring about a cessation of the issuance of debt. These states are brought about through progressively more serious breaches of various capital, market and operating triggers. There are a number of mechanisms which serve to mitigate asset loss which are applicable depending on the severity of the breach which range from moratoriums on asset purchases to suspension of payments to subordinate note holders and suspension of the investment manager performance fee. The last state brings about the imposition of a cessation of the issuance of debt, which would serve to limit market value losses should capital deteriorate significantly relative to net asset value. The progressive nature of the operating states formed a critical component of achieving the dual aim of increasing manager flexibility and maintaining adequate senior noteholder protection against severe and/or prolonged market adversity.

Obligor concentration was addressed through the incorporation of Fitch methodology in the assignment of capital against concentrations in investment grade categories and through compliance with individual position limits per individual obligor. The implementation of the methodology and limits are aimed to prevent excessively large individual positions from exacerbating asset losses in a stressful scenario, taking into account Sigma's relative size in the marketplace.

Fitch will continue to monitor Sigma on a regular basis, working closely with analysts in all the underlying asset sectors, and details are available on the Fitch Ratings web site at 'www.fitchratings.com'.