Fitch Ratings Downgrades 7 Classes Of Prudential Structured Finance CBO I.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 15, 2003

Fitch Ratings downgrades seven classes of notes issued by Prudential Structured Finance CBO I (Prudential SF CBO I).

The following classes have been downgraded:

-- Class A-1L floating-rate notes to 'AA+' from 'AAA';

-- Class A-1 fixed-rate notes to 'AA+' from 'AAA';

-- Class A-2L floating-rate notes to 'BBB+' from 'A-', removed

from Rating Watch Negative;

-- Class B-1L floating-rate notes to 'BB+' from 'BBB-', removed

from Rating Watch Negative;

-- Class B-1 fixed-rate notes to 'BB+' from 'BBB-', removed from

Rating Watch Negative;

-- Class B-2L floating-rate notes to 'B' from 'BB-', removed from

Rating Watch Negative; and

-- Class B-2 fixed-rate notes to 'B' from 'BB-', removed from

Rating Watch Negative.

The transaction, a collateralized bond obligation (CBO), is supported by a diversified portfolio of asset-backed securities (ABS), residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS). The class A-2L, B-1L, B-1, B-2L and B-2 notes were placed on Rating Watch Negative on Jan. 24, 2003. Fitch has had ongoing discussions with Prudential Investment Corporation (PIC), the asset manager, regarding the current state of the portfolio and asset management strategy. Fitch has reviewed the credit quality of the individual assets comprising the portfolio and has conducted cash flow modeling of various default timing and interest rate scenarios. As a result, Fitch has determined that the original ratings assigned to the class A-1L, A-1, A-2L, B-1L, B-1, B-2L and B-2 notes of Prudential SF CBO I no longer reflect the current risk to noteholders.

The rating actions are based on a number of factors including substantial downward rating migration in the credit quality of the portfolio and a reduction in excess spread. According to the March 2003 trustee report, the transaction was failing the Fitch weighted average rating factor (WARF) test. The Fitch WARF was 37.15 (or approximately 'BB+') for the period ended March 4, 2003. This exceeds the rating limitation of 33.00 (between 'BBB-' and 'BB+').

The portfolio contains a number of securities whereby default is probable, although no defaults have occurred to date. Fitch believes these factors have negatively impacted the performance of the transaction to the point where the available credit enhancement levels no longer support the original ratings. Approximately 48% of the collateral pool is currently rated in the non-investment grade category, including 19% rated 'CCC' or below. Prudential SF CBO I holds a number of securities that Fitch has identified as having a potential for adverse impact on the ability of the CBO to pay ultimate interest and ultimate principal on the class B-1L, B-1, B-2L and B-2 notes. One area where the portfolio has experienced significant credit deterioration is with mutual fund fee transactions. There are a number of troubled assets in this sector totaling approximately 8.2% of portfolio assets.

Fitch will continue to monitor the performance of the CBO over time. Based on certain structural parameters set at closing, Prudential has a limited number of actions it can currently take to actively manage the portfolio. As such, Fitch will focus on the credit quality of the portfolio and in particular, the concentration of assets in the non-investment grade category. Future downward migration in the credit quality of the pool may warrant further review of the transaction ratings.