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���������ֳ�-London-16 February 2009: ���������ֳ� has today downgraded seven classes of Pallas CDO II B.V.'s notes, removed the notes from Rating Watch Negative (RWN), and assigned a Stable Outlook to five of the notes as detailed below.

EUR75m class A-1-a (ISIN XS0268818209): downgraded to 'BBB' from 'AAA'; removed from RWN; assigned a Stable Outlook
EUR275m class A-1-d (ISIN XS0271520669): downgraded to 'BBB' from 'AAA'; removed from RWN; assigned a Stable Outlook
EUR44.5m class A-2 (ISIN XS0268904546): downgraded to 'BB' from 'AAA'; removed from RWN; assigned a Stable Outlook
EUR16m class B (ISIN XS0268818548): downgraded to 'B' from 'AA'; removed from RWN; assigned a Stable Outlook
EUR10.5m class C (ISIN XS0268818894): downgraded to 'B-' (B minus) from 'A'; removed from RWN; assigned a Stable Outlook
EUR2.5m class D-1-a (ISIN XS0268819199): downgraded to 'CCC' from 'BBB-' (BBB minus); removed from RWN
EUR12m class D-1-b (ISIN XS0268819272): downgraded to 'CCC' from 'BBB-' (BBB minus); removed from RWN

The downgrades reflect ���������ֳ�'s view on the credit risk of the rated tranches following the release of the agency's revised Structured Finance (SF) CDO rating criteria on 16 December 2008, as well as credit deterioration to the collateral pool. Pallas CDO II BV is a securitisation of mainly European structured finance assets with a total note issuance of EUR455m.

The application of the new SF CDO rating criteria incorporates ���������ֳ�'s view on industry and vintage concentration risks and the propensity for low recoveries upon default, particularly for thin tranches. While the downgrade of the class A-1-a, A-1-d, A2, and B notes was driven by ���������ֳ�'s revised criteria, the downgrade of the class C, D-1-a and D-1-b notes was additionally linked to the transaction's actual performance. Whilst all overcollateralisation (OC) tests are currently passing, the class C OC test is currently at 106.71% compared to a test minimum level of 103.08%. Given the current macroeconomic climate, ���������ֳ� expects further negative portfolio migration which could result in a higher percentage of 'CCC' assets. The resulting OC adjustments for 'CCC' assets may result in the class C OC test breaching, which would divert interest payments from the class D notes to amortise the senior notes. In ���������ֳ�'s view, whilst not imminent, the breach of the class C OC test in a stressed environment would make the likelihood of full recovery of the class D notes more remote.

In conducting its analysis, ���������ֳ� made a three-notch downward adjustment for any names on RWN under the default analysis of its Portfolio Credit Model. On an adjusted basis approximately 24.7% of the assets are treated as sub-investment grade. The weighted average portfolio quality is 'BBB-'(BBB minus)/'BB+' and 4.9% of the portfolio is on RWN by rating driver. Three assets are currently defaulted which represent 0.6% of the portfolio, and 1.45% are rated at 'CCC' or below.

As per the trustee report dated 6 January 2009, the portfolio contains 201 assets from 163 obligors, with the largest obligor accounting for approximately 2.9% of the outstanding portfolio, and the three largest obligors accounting for 6.4% of the outstanding portfolio amount. The largest single asset class is RMBS with 50% of the portfolio volume. The two largest vintages are 2007 and 2006 making up 24.7% and 21.8% of the portfolio respectively, while the four largest country concentrations are the United Kingdom, the Netherlands, Spain and Italy making up 26.9%, 20.7% 12.2% and 11.7% of the portfolio respectively.

The portfolio is actively managed by M&G Investment Management Limited (which is rated 'CAM2+' with respect to the Structured Finance CDO Asset Manager Rating on ���������ֳ�'s CDO Asset Manager Rating scale).

Further information on the performance of the transaction can be found on the agency's CDO S.M.A.R.T. analysis tool, available on the subscription website, .

Contacts: Jeffery Cromartie, CFA, London +44 (0) 20 7664 0072; Andrew Higham: +44 (0) 20 7417 6326.

Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.