Three classes of notes issued by Taberna Preferred Funding II Ltd., a collateralized debt obligation consisting in part of securities issued by real estate investment trusts, have been placed on Rating Watch Negative by Derivative Fitch.The affected securities were the class E-1, class E-2, and class F notes. Taberna II is a CDO backed primarily by trust-preferred securities issued by REITs and homebuilders. The negative rating actions were attributed to "the rapid deterioration in the credit quality of several residential mortgage REITs underlying the transaction," including two unnamed REITs that recently filed for bankruptcy protection. The rating agency can be found online at http://www.derivativefitch.com.

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