Fitch Affirms 4 & Downgrades 1 Class of CoLTS 2007-1 Ltd./LLC; Assigns LS Ratings

Fitch Ratings affirms four and downgrades one class of notes issued by CoLTS 2007-1, Ltd./LLC. (CoLTS 2007-1). 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 downgrade of the class E notes is the result of credit deterioration since the last review, with assets considered 'CCC+' or below increasing to 18.5% of the non-defaulted portfolio balance from 8.3%. Defaults have increased to 6.5%, or $24.1 million, from 4.9% of the total portfolio balance. Losses are reflected in the transaction's overcollateralization (OC) measurements. As of the last trustee report, Jan. 4, 2010, the class E OC test is failing at 101.32%, relative to a trigger of 104.4%. The Interest Diversion Test (IDT), which uses the same class E OC calculation, is also failing its trigger of 106.9%. Failure of the IDT redirects a maximum of 70% of available interest proceeds towards the purchase of additional collateral to cure the test. The IDT, however, is only applicable during the reinvestment period, which ends in March 2012. Despite a slight improvement in credit enhancement as a result of the redemption of notes from the failure of the class E OC test on the December 2009 payment date, the level of negative credit migration, combined with lower than expected recoveries on defaults has significantly increased the risk profile of the class E notes.

The affirmations are due to the ongoing credit support available to the class A, B, C and D notes. Protective structural features, such as class level OC tests, IDT, and significant levels of excess spread have supported the credit enhancement levels of these notes even as there has been some portfolio deterioration. The class A/B OC, class C OC, and class D OC tests continue to pass at 133.5%, 115.9%, and 108.3%, respectively, relative to their triggers of 114.2%, 106.6%, and 106.5%. The notes continue to perform as expected at their current rating levels.

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

Fitch also analyzed the structure's sensitivity to ongoing weaknesses in U.S. corporate recoveries. Fitch reduced its average recovery rate assumptions for each asset type by 30%, where explicit Recovery Ratings were not available. The class D and class E notes displayed considerable sensitivity to these stressed recoveries. As a result, the Rating Outlook for these classes remains Negative.

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 2007-1 is a revolving cash flow collateralized loan obligation (CLO) that closed Feb. 27, 2007 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 Structured Asset Investors, LLC, on June 15, 2009. The transaction will exit the reinvestment period in March 2012. The portfolio is currently comprised of 96.2% first lien and 3.8% of second lien loans.

Fitch affirms, downgrades and assigns LS ratings to the following notes as indicated:

--$240,690,909 class A floating rate notes affirmed at 'AAA/LS2', Outlook Stable;

--$ 22,250,000 class B floating rate notes affirmed at 'AA/LS5', Outlook Stable;

--$40,000,000 class C floating rate deferrable interest notes affirmed at 'A/LS4', Outlook Stable;

--$21,215,000 class D floating rate deferrable interest notes affirmed at 'BBB/LS5', Outlook Negative;

--$22,250,000 class E floating rate deferrable interest notes downgraded to 'B/LS5' from 'BB', Outlook Negative.

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

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

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

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

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

--'Criteria for Interest rate Stresses in Structured Finance Transactions' (Feb. 17, 2010).

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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