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Fitch Takes Various Rating Actions on ZAIS Investment Grade Limited V

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NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has upgraded one and affirmed three classes of notes issued by ZAIS Investment Grade Limited V (ZAIS V) as follows:

--$44,601,157 class A-1 notes upgraded to 'BBsf'; Outlook Stable;

--$25,000,000 class A-2 notes affirmed at 'Dsf';

--$37,000,000 class B-1 notes affirmed at 'Csf';

--$14,000,000 class B-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. These default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Fitch also considered additional qualitative factors in its analysis to conclude the rating actions for the rated notes.

The upgrade to the class A-1 notes reflects the significant paydowns to the class since last review. The class A-1 notes have received approximately $93.8 million, or 67.8% of the previous balance through principal amortization and excess spread over the last year. The notes are now passing at the 'BB+/BBB-' rating categories based on the cash flow modeling results, and are expected to continue benefiting from additional paydowns through excess spread.

On Aug. 6, 2009, a majority of the notes of the controlling class (comprised of class A-1 and class A-2) directed the trustee to declare the principal of all the notes to be immediately due and payable. Consequently, all interest and principal proceeds are being distributed to the class A-1.

Due to the acceleration of maturity, the class A-2 notes are not receiving interest. Per the transaction documents, interest shortfalls to these notes constitute a default. The notes' current defaulted interest balance stands at $5.8 million following the most recent payment date on Aug. 8, 2012. This class is expected to continue to default on its interest until class A-1 notes are paid in full. Therefore, the class A-2 notes have been affirmed at a 'Dsf'.

The class B-1 and B-2 notes have been affirmed at 'Csf' since they are no longer receiving interest payments. Default for these notes appears to remain inevitable at or prior to maturity, as deferred interest balances continue to accrue.

ZAIS V is a structured finance collateralized debt obligation (SF CDO) that closed on Dec. 19, 2002 and is monitored by Zais Group, LLC. As of the Sept. 6, 2012 trustee report, the portfolio is composed of SF and corporate CDOs from primarily 2001 through 2006 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);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 20, 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

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=673560

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Fitch Ratings
Primary Surveillance Analyst
Felix Chen
Analyst
+1-212-908-9154
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Alina Pak
Senior Director
+1-312-368-3184
or
Media Relations:
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com

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