S&P Lwrs Rtg on Dilmun Capital II; Off Watch.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 8, 2003

Standard & Poor's Ratings Services lowered its rating on the mezzanine notes issued by Dilmun Capital II Ltd., a high-yield arbitrage CBO transaction managed by AIG Global Investments Corp., and removed it from CreditWatch with negative implications where it was placed April 24, 2003. At the same time, the 'AAA' rating on the senior class notes is affirmed, based on a financial guarantee insurance policy issued by MBIA Insurance Corp. (see list). AIG Global Investments Corp. assumed management of the deal March 25, 2003.

The lowered rating on the mezzanine notes reflects factors that have negatively affected the credit enhancement available to support the notes since the last rating action Jan. 7, 2003. These factors include continuing par erosion of the collateral pool securing the rated notes and a negative migration in the credit quality of the performing assets in the pool.

As of the most recently available monthly trustee report (June 16, 2003), the deal holds $17.55 million worth of securities that are in default, approximately $14.80 million of which defaulted since the last rating action. Standard & Poor's noted that as a result of asset defaults, the overcollateralization ratios for the transaction have suffered since the last rating action. According to the June 16, 2003 trustee report, the overcollateralization ratio for the mezzanine class notes was 93.82%, versus the minimum required ratio of 105.10%, and compared to a ratio of 102.51% at the time of the last rating action. The overcollateralization ratio for the senior class notes was 98.72%, versus the minimum required ratio of 109.60%, and compared to a ratio of 107.51% at the time of the last rating action.

The credit quality of the collateral pool has also deteriorated since the last rating action. Currently, $21.25 million (or approximately 10%) of the performing assets in the collateral pool come from obligors whose ratings are on CreditWatch negative. Of the performing assets in the pool, $8.50 million (or approximately 4%) come from obligors with ratings in the 'CCC' range.

Standard & Poor's has reviewed current cash flow runs generated for Dilmun Capital II Ltd. to determine the level of future defaults the rated class can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. After comparing the results of these cash flow runs with the projected default performance of the performing assets in the collateral pool, Standard & Poor's determined that the rating assigned to the mezzanine notes was no longer consistent with the credit enhancement available, resulting in the lowered rating. Standard & Poor's will continue to monitor the future performance of the transaction to ensure that the ratings assigned to the notes remain consistent with the credit enhancement available.

RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE

Dilmun Capital II Ltd.

                 Rating                  Balance (mil. $)
Class        To          From            Prior    Current
Mezz notes   B           BB-/Watch Neg   10.55      11.14

RATING AFFIRMED

Dilmun Capital II Ltd.

                        Balance (mil. $)
Class          Rating   Prior     Current
Senior notes   AAA      201.72     198.61