Fitch Ratings Affirms Sutter CBO 1999-1 Ltd.

NEW YORK -- Fitch Ratings affirms seven classes of notes issued by Sutter CBO 1999-1 Ltd. (Sutter 1999-1). These affirmations are the result of Fitch's review process and are effective immediately:

-- $61,696,785 class A-2L notes at 'AAA';

-- $75,000,000 class A-3L notes at 'AAA';

-- $5,000,000 class A-4L notes at 'BBB+';

-- $24,000,000 class A-4 notes at 'BBB+';

-- $5,000,000 class B-1L notes at 'BB+';

-- $6,000,000 class B-1 notes at 'BB+';

-- $10,000,000 class B-2 notes at 'B+'.

Sutter 1999-1 is a collateralized bond obligation (CBO) managed by Wells Fargo Bank, NA which closed Nov. 17, 1999. Sutter 1999-1 is composed of high yield bonds (89.5%), commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) securities (8.9%), and high yield loans (1.6%). Included in this review, Fitch discussed the current state of the portfolio with the asset manager, and their portfolio management strategy going forward.

To date, the class A-1L notes have been paid in full and the class A-2L notes have been paid down by approximately $13.3 million, representing 36.4% of the original senior class A (A-1L, A-2L, and A-3L) note balance. Since the last rating action on Oct. 15, 2003, the senior class A, class A, and class B overcollateralization (OC) ratios have all increased from 126.5%, 111%, and 101.8% to 140.7%, 115.4%, and 101.9%, respectively, as of the most recent trustee report dated Dec. 17, 2004. The weighted average rating has remained stable at approximately 'B-'. As of the most recent trustee report available, defaulted assets represented 10.3% of the $207 million of total collateral. Assets rated 'CCC+' or lower represented approximately 22.3% of total collateral, excluding defaults.

Sutter 1999-1 has been adversely affected by faster than anticipated prepayments causing a misalignment in the interest rate hedge and a declining weighted average coupon (WAC). Higher than expected refinancings has caused the portfolio to be overhedged by approximately $24 million. The refinancings have also been the main cause of a declining WAC from 9.25% to 8.88% since the previous rating action. The hedge misalignment and declining WAC have been depleting excess spread, as evident in the declining interest coverage (IC) ratio from 168.1% to 114.6%. The interest rate hedge has a fixed notional balance of $165 million and matures on May 30, 2007.

The rating of the class A-2L and A-3L notes addresses 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 legal final maturity date. The ratings of the class A-4, A-4L, B-1, B-1L, and B-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date.

Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the current ratings assigned to the class A-2L, A-3L, A-4, A-4L, B-1, B-1L, and B-2 notes still reflect the current risk to noteholders.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at 'www.fitchratings.com'. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, and also available at 'www.fitchratings.com'.