Fitch Ratings has upgraded three and affirmed six classes issued by Crest CDO 2004-1 Ltd./Corp. (Crest 2004-1). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades follow continued deleveraging of the transaction as the underlying collateral continues to amortize. Since the last rating action, there has been approximately $61.9 million in collateral paydown. Of the remaining assets, 25.8% of the underlying collateral has been upgraded and 11% has been downgraded a weighted-average of 5.42 and 2.83 notches, respectively. The class A, B and C notes have all paid in full. The most senior note, class D, is current on interest payments, while all other classes are experiencing interest shortfalls due to the failure of the class C/D interest coverage and over collateralization coverage tests. Hedge payments will expire in October of this year and the pool has become increasingly concentrated with 31 assets and 16 obligors remaining.

This transaction was analysed under the framework described in Fitch's 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Fitch also analysed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities, and conducted a look-through analysis of the underlying portfolio. Based on this analysis, the class D notes were believed to be sufficiently protected.

Fitch further analysed each class' sensitivity to the default of the distressed assets ('CCC' and below). As noted above, the pool has continued to deleverage and several of the underlying bonds are first-pay pieces or fully covered by defeasance. In addition to the upgrade of the class D notes, the class E notes were upgraded to 'CCsf' from 'Csf' to indicate that default is considered probable, but not inevitable. However, Fitch recognizes the high probability of default for a number of the underlying assets and the expected limited recovery upon default. For this reason, the class F through H notes have been affirmed at 'Csf', indicating that default is inevitable.

The rating of the preferred shares addresses the likelihood that investors will receive the ultimate return of the aggregate outstanding rated balance by the legal final maturity date. The assigned rating for the preferred shares indicates that default is considered inevitable, as they are undercollateralized.

RATING SENSITIVITIES

The Stable Outlook on the class D notes reflects Fitch's view that the transaction will continue to pay down. Crest 2004-1 is a static collateralized debt obligation (CDO) that closed on Nov. 18, 2004. The current portfolio consists of 96.4% commercial mortgage backed securities (CMBS) from the 1999 through 2004 vintages, and 3.6% structured finance CDOs.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has upgraded the following classes:

--$15,516,657 class D notes to 'BBsf' from 'CCsf'; assigned Stable Outlook;

--$14,185,564 class E-1 notes to 'CCsf' from 'Csf';

--$17,265,096 class E-2 notes to 'CCsf' from 'Csf';

Fitch has affirmed the following classes:

--$7,131,561 class F notes at 'Csf';

--$2,414,168 class G-1 notes at 'Csf';

--$14,330,540 class G-2 notes at 'Csf';

--$9,393,815 class H-1 notes at 'Csf';

--$1,565,972 class H-2 notes at 'Csf';

--$96,412,500 preferred shares notes (principal-only) at 'Csf'.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Global Surveillance Criteria for Structured Finance CDOs (pub. 13 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867800

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997886

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997886

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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