Fitch Downgrades 8 Classes of Abacus 2005-CB1, Ltd.

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded eight classes of notes issued by Abacus 2005-CB1, Ltd (Abacus 2005-CB1) as a result of significant credit deterioration within the portfolio since last review in July 2008. The details of the rating action follow at the end of this press release.

As per the latest trustee report dated September 2009, aggregate losses in the reference portfolio have reached approximately $133.8 million. These losses have completely eroded the balance of class B, C, D, E-1, E-2, and F notes and resulted in a loss of $18.5 million on class A-2 notes.

This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. Due to the significant collateral deterioration, all PCM rating loss rates exceed the credit enhancement available to each class of notes.

In addition to realized losses, the collateral continues to experience negative migration with approximately 68.7% of the current portfolio downgraded a weighted average of 5.9 notches since last review. The downgrades to the portfolio have left approximately 51.2% of the portfolio with a Fitch derived rating below investment grade and 47.5% with a rating in the 'CCC' rating category or lower. Given the class A-1 notes' credit enhancement level of 1% and portfolio composition, Fitch expects significant principal impairment for the class A-1 notes.

The underlying credit default swap (CDS) provides for the possibility of reimbursements from the CDS counterparty to the collateralized debt obligation (CDO) when a reference obligation balance is written up, which would lead to a corresponding write-up in the CDO notes' balances. However, Fitch believes this to be an unlikely occurrence. All classes of notes are downgraded to 'C' to reflect the fact that default is inevitable prior or at maturity.

Abacus 2005-CB1 is a partially funded synthetic CDO transaction issued in December 2005 referencing a $750 million portfolio of asset-backed securities. The CDS counterparty is Goldman Sachs Capital Markets, L.P. (GSCM), which is rated 'A+/F1+' with a Stable Outlook by Fitch. Presently, Abacus 2005-CB1's portfolio is comprised primarily of subprime RMBS bonds (55.9%), CMBS (34.1%) and other structured finance assets. Subprime RMBS bonds of the 2005 vintage account for approximately 29.5% of the portfolio.

Fitch has downgraded the following classes:

--$132,187,500 class A-1 notes to C' from 'CCC';

--$3,958,720 class A-2 notes to 'C' from 'CCC';

--$0 class B notes to 'C' from 'CC';

--$0 class C notes to 'C' from 'CC';

--$0 class D notes to 'C' from 'CC';

--$0 class E-1 notes to 'C' from 'CC';

--$0 class E-2 notes to 'C' from 'CC';

--$0 class F notes to 'C' from 'CC'.

These rating actions reflect the application of Fitch's current criteria which are available at www.fitchratings.com and specifically include the following reports:

--'Global Structured Finance Rating Criteria' (Sept. 30, 2009);

--'Global Rating Criteria for Synthetic CDOs' (March 9, 2009);

--'Global Rating Criteria for Structured Finance CDOs' (Dec. 16, 2008).

Additional information is available at www.fitchratings.com.

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