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Fitch Takes Rating Actions on Coast Investment Grade 2002-1, Ltd./Corp.

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NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has upgraded one class and affirmed three classes of notes issued by Coast Investment Grade 2002-1, Ltd./Corp. (Coast 2002-1) as follows:

--$53,019,440 class A notes upgraded to 'Bsf', Outlook Stable;

--$24,000,000 class B notes affirmed at 'Csf';

--$26,600,000 class C-1 notes affirmed at 'Csf';

--$3,400,000 class C-2 notes affirmed at 'Csf'.

This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio.

The upgrade to the class A notes is due to the increase in credit enhancement from continued deleveraging of the transaction since the last review and improved credit quality of the underlying collateral. The notes have received approximately $54.1 million of principal repayment, or 50.5% of its previous outstanding balance through principal amortization of underlying assets and excess spread.

Since Fitch's last rating action in October 2011, approximately 18.9% of the portfolio have been upgraded a weighted average of 2.1 notches and there have been no downgrades. Currently, 73.6% of the portfolio has a Fitch derived rating below investment grade with 61.1% of the portfolio rated in the 'CCC' category or below, compared to 81.7% and 67.3%, respectively, at last review.

Fitch expects the credit quality of the underlying assets in the portfolio to improve, as several corporate collateralized debt obligations in the portfolio are currently on Rating Watch Positive. Furthermore, the notes are expected to continue benefiting from excess spread on each semi-annual distribution date. The Stable Outlook reflects the expected performance of the underlying portfolio and the available cushion above the notes' passing rating.

The amortization of the class A notes has also increased the credit enhancement levels for the class B notes. However, given the relatively concentrated portfolio of 17 assets, the risk of adverse selection remains a concern as the portfolio continues to amortize and the class B notes have been affirmed at 'Csf'. Credit enhancement levels for the class C-1 and C-2 notes were below SF PCM's 'CCC' default level, the lowest level of rating stress projected by SF PCM. For these classes, Fitch compared the respective credit enhancement levels of the classes to expected losses from distressed and defaulted assets in the portfolio (assets rated 'CCsf' or lower). This comparison indicates that default continues to appear inevitable for the notes at or prior to maturity.

Coast 2002-1 is a SF CDO that closed on May 30, 2002 and is monitored by Coast Asset Management. As of the Sept. 28, 2012 trustee report, the portfolio is comprised entirely of corporate CDOs from primarily 2001 through 2007 vintage transactions.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

The information used to assess these ratings was sourced from the issuer, periodic trustee reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012);

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

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Fitch Ratings
Primary Surveillance Analyst
Felix Chen, +1 212-908-9154
Analyst
Fitch, Inc.
One State Street Plaza
New York, NY 10004
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Alina Pak, +1 312-368-3184
Senior Director
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Email: sandro.scenga@fitchratings.com













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