Fitch Downgrades 3 & Affirms 3 Class of Jupiter High-Grade CDO II, Ltd./Inc.

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has downgraded three and affirmed three classes of notes issued by Jupiter High-Grade CDO II, Ltd./Inc. (Jupiter II). The details of the rating action follow at the end of this press release.

As of the November 2009 trustee report, the current balance of the portfolio is $712.8 million, of which $214.7 million consists of defaulted securities as defined in the transaction's governing documents. Approximately 79.3% of the portfolio has been downgraded since Fitch's last rating action in July 2008, resulting in 54% of the portfolio with a Fitch derived rating below investment grade and 43.7% with a rating in the 'CCC' rating category or below, as compared to 21% and 4.5%, respectively, at last review.

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. Due to the significant collateral deterioration, credit enhancement levels available to all classes of notes are exceeded by the 'CCC' rating loss rate, the lowest rating level loss projected by SF PCM. Given this, Fitch believes that the likelihood of default for all classes of notes in this transaction can be assessed without performing cash flow model analysis under the framework described in the 'Global Criteria for Cash Flow Analysis in CDOs - Amended' report.

Fitch compared the respective credit enhancement levels for each rated class of notes with the amount of underlying assets considered distressed (rated 'CCC' and lower). These assets have a high probability of default and low expected recoveries upon default. The class A-1, A-2, and B notes have the credit enhancement levels of 6.8%, 1.8% and -3.9%, respectively. While these classes are still receiving interest distributions, given the amount of distressed assets in the portfolio, Fitch believes that default is inevitable for these classes at or prior to maturity.

The class C-1A, C-1B, and C-1C notes (together, the class C notes) are no longer receiving interest distributions and are not expected to receive any proceeds going forward. Therefore, the class C notes have been affirmed at 'C' to indicate Fitch's belief that default is inevitable at or prior to maturity.

Jupiter II is a cash flow collateralized debt obligation (CDO), which closed on March 29, 2005. In February 2008, High Perch LLC replaced Maxim Advisory LLC as the manager of the transaction. Jupiter II has a portfolio of which currently 50.9% comprises subprime residential mortgage-backed securities (RMBS), 22.5% consists of Alternative-A (Alt-A) RMBS, and 15.2% of structured finance (SF) CDOs. Prime RMBS represents 10.5% of the portfolio.

Fitch has downgraded or affirmed the following ratings as indicated:

--$667,172,423 class A-1 downgraded to 'C' from 'BB-'.

--$35,436,691 class A-2 downgraded to 'C' from 'CCC';

--$40,752,195 class B downgraded to 'C' from 'CC';

--$10,699,583 class C-1A affirmed at 'C';

--$3,852,791 class C-1B affirmed at 'C';

--$8,507,088 class C-1C affirmed at 'C'.

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

--'Global Rating Criteria for Structured Finance CDOs' (Dec. 16, 2008);

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

Additional information is available at 'www.fitchratings.com'.

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