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Fitch Downgrades C-BASS On Failed Merger

09 Nov 2007

Derivative Fitch Thursday downgraded and placed on negative watch C-BASS Investment Management’s collateralized debt obligation asset manager rating to CAM3 from CAM1-.

--Aaron Johnson

Derivative Fitch Thursday downgraded and placed on negative watch C-BASS Investment Management’s collateralized debt obligation asset manager rating to CAM3 from CAM1-. The downgrade is a result of a review the company is currently conducting of all 23 CDO asset managers it rates.

To date, downgrades of the CDO manager ratings have been related to CDO performance. C-BASS’ downgrade, however, stems from the failed merger of C-BASS’ parent company Radian Group with MGIC Investment, as well as several internal issues that are not yet public, said Vincent Matsui, Fitch analyst. He declined to elaborate on those issues. “The other managers will be much more performance-focused as opposed to the larger organizational issues [C-BASS] is wrestling with,” Matsui said. “C-BASS’ transactions were structured rather conservatively. Where [a CAM rating downgrade] becomes [a problem] is where transactions are structured very aggressively with minimal ratings cushion.”

Bear Stearns Asset Management and GSC Group were the first two managers downgraded as a result of the review. Further manager rating actions as a result of the review will not likely materialize until the end of next week or just before Thanksgiving, Matsui said.

09 Nov 2007