Fitch Affirms CoLTS 2005-1 Ltd./Corp.; Assigns LS Ratings

Fitch Ratings affirms both remaining classes of notes issued by CoLTS 2005-1, Ltd./Corp. (CoLTS 2005-1). A detailed list of rating actions follows the end of this press release.

This review was conducted under the framework described in the reports 'Global Rating Criteria for Corporate CDOs', 'Global Structured Finance Rating Criteria', 'Global Criteria for Cash Flow Analysis in Corporate CDOs', 'Global Surveillance Criteria for Corporate CDOs', and 'Criteria for Structured Finance Loss Severity Ratings.'

The affirmation of the class D notes is the result of the credit enhancement available to the notes as the highly concentrated portfolio continues to wind down. Approximately 89% of the original class D balance has been redeemed and, as a result, credit enhancement levels of the class D notes have improved significantly from the last review.

The affirmation of the class E notes is due to sufficient asset coverage that remains available to the notes, despite the level of deterioration that has occurred. Excess spread has benefited enhancement levels, but this was significantly offset by increasing defaults. According to the quarterly trustee report dated Dec. 18, 2009, only five of the 10 remaining loans, approximately $9.7 million of $26.8 million, remains current (non-default). The balance of defaulted loans more than doubled since the last review, increasing to 64% of the total notional balance from 27%, and represents half of the portfolio by loan count. The total portfolio contains 10 loans from eight unique obligors. The largest obligor fell into payment default in June 2009, which represents 31% of the total notional balance.

The performance of the class E notes will be highly driven by recoveries on the remaining assets. Approximately 95% of the portfolio is comprised of first lien senior secured loans. Fitch expects the portfolio will provide sufficient credit support to the class E notes even in very conservative performance scenarios. For example, if all the portfolio assets were to default, an average recovery of only 32%, which is well below the historical averages for senior secured loans, would be needed to redeem the class E notes. Fitch believes the class D and E notes will continue to perform, even if recoveries fell below expectations, prompting an Outlook Stable status on both tranches.

The ratings of the class D and E notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date.

The notes were also assigned Loss Severity (LS) ratings. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base-case loss expectation for the collateral, as explained in Fitch's 'Criteria for Structured Finance Loss Severity Ratings'. The LS rating should always be considered in conjunction with the notes' long-term credit rating. Fitch does not assign LS ratings to tranches rated 'CCC' and below.

CoLTS 2005-1 is a cash flow collateralized loan obligation (CLO) that closed March 3, 2005 and is managed by Ivy Hill Asset Management, L.P. (Ivy Hill), an affiliate of Ares Capital Corporation (ARCC). Ivy Hill became manager through a sub-servicing agreement executed with Wachovia Bank, N.A. on June 15, 2009.

Fitch affirms and assigns LS ratings to the following notes:

--$2,758,499 class D notes at 'A/LS5', Outlook Stable;

--$5,763,020 class E notes at 'BBB/LS5', Outlook Stable.

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 Rating Criteria for Corporate CDOs' (April 30, 2008);

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

--'Global Criteria for Cash Flow Analysis in CDOs - Amended' (Nov. 9, 2009);

--'Global Surveillance Criteria for Corporate CDOs' (Dec. 7, 2009);

--'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009).

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are also available at 'www.fitchratings.com'.

Additional information is available at www.fitchratings.com.

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