Fitch Model Tracks Rating Transition & Spread Migration on

LSS CDOs
LONDON & NEW YORK--(BUSINESS WIRE)--Sept. 7, 2005--Fitch Ratings, the international rating
agency, has today launched a beta version of a model that allows users to estimate the effect of
rating transition and spread migration in leveraged super-senior (LSS) transactions. Fitch's core
CDO modeling tool, the Fitch VECTOR Default model, has been adapted to allow users to conduct
this analysis in addition to the default and recovery risks normally associated with CDO transactions.
'Analysis of LSS transactions with embedded spread trigger matrices is complex. It involves
considering a number of factors including rating migration within a portfolio of reference entities
and corporate credit spread volatility,' said Richard Gambel, Managing Director, European
Structured Finance, Fitch Ratings.
'The analysis needs to be time dependent; it matters when defaults, downgrades, or spread shocks
occur. The time dependency makes VECTOR's multi step architecture ideal for adapting to this type
of analysis,' added Richard Hrvatin, Managing Director, U.S. CDOs, Fitch Ratings.
An important innovation in synthetic CDOs this year, LSS trades provide investors with a leveraged
exposure to the super-senior portion of a CDO capital structure.
One of the key features of LSS deals is the early unwind trigger whose occurrence potentially causes
the transaction to terminate. This exposes the investor to the risk of significant losses depending on
the prevailing market value position of the super-senior tranche.
The VECTOR Migration and Spread Beta Model has been made available to market participants in
response to the substantial interest shown in the special report 'Leveraged Super-Senior Credit
Default Swaps' published by Fitch on 26 July 2005 and available at www.fitchratings.com. Fitch is
also providing additional detail on the agency's approach to rating LSS transactions with embedded
spread trigger matrices.
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.
Fitch Ratings
Henning Segger, +44 (0)20 7417 6330 (Europe)
Richard Hrvatin, 212-908-0690 (North America)
Koichi Ohtani +81 3 3288 2643 (Japan)
Gilbert Ong +852 2263 9912 (Hong Kong)
David Carroll +61 2 8256 0333 (Australia)

Julian Dennison, +44 (0)20 7862 4080 (London, Media

Relations)
Sandro Scenga, 212-908-0278 (New York, Media Relations)
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-Spread-Migration