Fitch: Assignment of Cutwater Asset Management Will Not Impact Oceanview CBO I Ratings

Fitch Ratings has reviewed Cutwater Asset Management Corp. (Cutwater) as a potential replacement collateralized debt obligation (CDO) asset manager for Oceanview CBO I, Ltd. (Oceanview), a diversified structured finance CDO formerly managed by Deerfield Capital Management LLC (Deerfield), and determined the manager's capabilities to be consistent with the current ratings assigned to the transaction.

In February 2010, Fitch was notified of a proposal to transfer the CDO asset management responsibilities for Oceanview to Cutwater from Deerfield. Fitch's initial and on-going rating of CDO transactions includes a review of the CDO asset manager to determine whether they are consistent with the standards outlined in Fitch's asset manager rating criteria.

Cutwater (which changed its name from MBIA Capital Management Corp. on Feb. 8, 2010) is a fixed income asset management subsidiary of MBIA, Inc. Cutwater is headquartered in Armonk, NY and currently employs approximately 100 professionals. As of February 2010, Cutwater and its affiliates managed approximately $43 billion of fixed income assets. Current deals under management include 13 CDOs representing approximately $4 billion of assets under management. Cutwater is registered with the SEC as an investment adviser and is also a member firm of FINRA, subject to regulation as a broker-dealer.

Fitch emphasizes that the scope of its review was solely to determine that Cutwater meets Fitch's minimum guidelines to manage Oceanview within the context of Fitch's stated review procedure for replacement managers. Furthermore, this review was in the context of the current management responsibilities associated with Oceanview and the current ratings assigned to Oceanview by Fitch. Fitch is not a party to the transactions and therefore does not provide consent or approval, as that remains the sole preserve of the transaction parties. Fitch expects to be notified by the trustee when or if the proposed transfer of asset management responsibilities is completed.

Oceanview is a cash flow CDO that closed on June 27, 2002. The four year reinvestment period ended in June 2006. Oceanview declared an event of default on Dec. 7, 2009 following a decline of the class A-1 overcollateralization ratio to below 103%. On March 3, 2010, the majority of the controlling class elected to accelerate the transaction. As of the February 2010 trustee report, the balance of the portfolio was $189.1 million, including $41.8 million, or 22.1%, in par of assets deemed defaulted as per the transaction's governing documents. Approximately 58.6% of the portfolio has a Fitch derived rating below investment grade and 46.7% of the portfolio is rated in the 'CCC' rating category or below. Presently, 53.2% of the portfolio is comprised of subprime residential mortgage-backed securities, 21.9% corporate debt, 16.1% structured finance CDOs, and 7.3% of various consumer and commercial asset-backed securities. The remaining 1.5% of the portfolio consists of 1.1% commercial mortgage-backed securities and 0.5% of real estate investment trust debt securities.