Fitch Upgrades One and Affirms Two Classes of Madison Square 2004-1

Fitch Ratings has upgraded one and affirmed two classes of Madison Square 2004-1. A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Since Fitch's last rating action in December 2013, approximately 5.4% of the underlying collateral has been downgraded and 14.3% has been upgraded. Currently, 85.7% of the portfolio has a Fitch-derived rating below investment grade and 85.7% has a rating in the 'CCC' category and below, compared to 94.5% and 89%, respectively, at the last rating action. Over this period, the transaction has received $57.8 million in paydowns resulting in the full repayment of the class O notes and $34.9 million in paydowns to the class P notes.

This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Additionally, a deterministic analysis was performed where the recovery estimate on the distressed collateral was modeled in accordance with the principal waterfall. An asset by asset analysis was then performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Based on this analysis, the credit enhancement levels for the class P notes are consistent with the ratings indicated below.

For the class Q and S notes, Fitch analyzed each class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, the class Q and S notes have been affirmed at 'Csf', indicating that default is inevitable.

RATING SENSITIVITIES

The Stable Outlook on the class P notes reflects Fitch's view that the notes will continue to delever.

Madison Square 2004-1 is a CMBS B-piece resecuritization that closed March 31, 2004. The transaction is currently collateralized by eight assets from four obligors from the 1998 through 1999 vintages.

Fitch has taken the following actions as indicated:

--$7,397,014 class P notes upgraded to 'BBsf' from 'CCsf'; assign Outlook Stable

--$23,245,712 class Q notes affirmed at 'Csf';

--$18,059,233 class S notes affirmed at 'Csf'.

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

Applicable Criteria and Related Research:

--''Global Rating Criteria for Structured Finance CDOs' (July 16, 2014);

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=934856

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