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Fitch Downgrades Abacus 2007-18; Removes from Watch Negative

NEW YORK - (BUSINESS WIRE) - Fitch Ratings has downgraded and removed from Rating Watch Negative five classes issued by Abacus 2007-18 as a result of significant negative credit migration of the commercial mortgage backed securities (CMBS) collateral within the reference portfolio. A complete list of rating actions follows at the end of this press release.

Since Fitch's last rating action in January 2009, approximately 41% of the portfolio has been downgraded, and 46.9% was placed on Rating Watch Negative. Approximately 96.8% of the portfolio has a Fitch derived rating below investment grade and 35.3% has a rating in the 'CCC' rating category or lower, compared to 50.7% and 2.5% at last review.

This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. The degree of correlated default risk of this reference collateral is high given the single sector CMBS and vintage concentrations.

Due to the significant collateral deterioration, Fitch's loss expectation approximates the credit enhancement available to the class A-3 notes, indicating a real possibility for default. The class A-3 notes have been assigned a 'CCC' rating. Fitch's loss expectation exceeds the credit enhancement available to the classes below class A-3. Given the high probability of default of the underlying assets and the expected low recoveries upon default, the class B notes and B series 2 notes have been assigned a 'CC' rating, indicating that default is probable.

For the class A-1 and A-2 notes, the credit enhancement provided by the A-3 notes and below is insufficient to warrant ratings for these classes above the 'CCC' rating category.

Abacus 2007-18 is a static synthetic CDO transaction issued in May 2007 that references a US$1 billion portfolio of CMBS and CRE CDO securities. The reference portfolio is composed of 91.3% CMBS assets, of which 90% are from the 2005 through 2007 vintages, 8.8% are SF CDOs from the 2006 and 2007 vintages, and the balance are CMBS assets from the 2001 vintage (1.3%). The transaction is designed to provide credit protection for realized losses on the reference portfolio through a Credit Default Swap (CDS) between the issuer and the swap counterparty, Goldman Sachs Capital Markets, L.P. ('GSCM').

Proceeds from the securities are invested in a pool of eligible investments, which are currently held in the principal collection account by the trustee. Collateral market value risk is mitigated through the collateral put agreement between the issuer and the put counterparty, Goldman Sachs International (GSI). The payment obligations of the put counterparty are guaranteed by GSI, the swap counterparty guarantor, except in the event of a Mandatory Redemption. A Mandatory Redemption can occur in an Event of Default or termination event.

Fitch has downgraded the following classes as indicated:

--$80,000,000 class A-1 notes to 'CCC' from 'BBB-';

--$50,000,000 class A-2 notes to 'CCC' from 'BB+';

--$11,500,000 class A-3 notes to 'CCC' from 'BB';

--$5,000,000 class B notes to 'CC' from 'BB';

--$17,500,000 class B series 2 notes to 'CC' from 'BB';

In addition, classes A-1 through B have been removed from Rating Watch Negative.

Fitch does not rate classes C through R.

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);

--'Counterparty Criteria for Structured Finance Transactions' (Oct. 22, 2009).

Additional information is available at www.fitchratings.com.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.

Fitch Ratings, New York
Karen Trebach, +1-212-908-0215
Kevin Kendra, +1-212-908-0760
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com