Fitch Updates Criteria Analyzing Market Value Structures.

NEW YORK -- Fitch Ratings today issued an updated Criteria Report that discusses Fitch's approach for rating Market Value Structures (MVS).

This criteria update is in response to ongoing dislocations in the credit markets, which began in July of 2007, and have continued to place unprecedented stresses on the liquidity and market values of credit instruments. Market prices have come under pressure, even for assets that are not undergoing a credit stress. As a result, many prevailing assumptions about funding access, asset liquidity, and risk have been re-examined.

Some of the highlights of this report include the following:

--Fitch will use its existing ratings scale to rate market value structures. As well, Fitch will use the new criteria to surveill and re-evaluate its ratings on all existing MVS transactions;

--Fitch will apply both quantitative and qualitative considerations when analyzing MVS. Quantitative factors will include new updated advance rates/over-collateralization ranges for various asset types based on data that includes the recent stress that has occurred beginning in latter half of 2007. Qualitative factors will include structural market changes that may render past performance data less relevant, manager skill set, pricing procedures and any data limitations;

--Ranges of advance rates (ARs) at each ratings level are established by classifying asset types into a limited number of categories. Assets will be assigned to these categories based on their expected liquidity and volatility, particularly with respect to their performance throughout this current market crisis and other stressed market conditions, as well as their structural complexity and transparency. Within this framework, Fitch will evaluate transactions on a case by case basis taking into account the nature of the assets and any unique structural features.

--MVS that are backed by less liquid asset types will not be eligible, in most cases, to receive ratings above 'A'. MVS with illiquid assets will not be eligible, in most cases, for investment;

--Traditional MVS can continue to be rated as high as 'AAA' subject to additional stresses. Traditional MVS are those structures with deleveraging/protection based triggers which are set "outside of the tranche", such that the transaction may be able to undertake an orderly de-leveraging/unwind without loss to the rated notes.

--Ratings for 'Knock-out' MVS, in most cases, will be capped at 'BBB'. Knock-out MVS are those structures with high loss triggers set "inside of the tranche", such that the transaction may unwind with a significant/total loss to the rated notes.

Ratings that may be impacted by Fitch's updated MVS criteria include approximately $23.8 billion in issuance across 52 transactions. Transaction types include: corporate market value (MV) CDOs, guaranteed investment contracts (GIC) facilities, mortgage MV CDOs, collateralized funding obligations (CFOs), leveraged super senior (LSS) notes, and total rate of return (TRR) collateralized debt obligations (CLOs).

Fitch will continue to communicate its views on MVS on an ongoing basis and will provide more detailed commentary on different aspects of MVS criteria as the market evolves.

A copy of the Criteria Report is now available on www.fitchratings.com under the following headers: Sectors then Structured Finance then Structured Credit then Criteria & General Reports

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.