Four classes of securities issued by Independence II CDO Ltd., a collateralized debt obligation, have been downgraded by Fitch Ratings.The downgrades were as follows: class A notes, from AAA to AA-plus; class B notes, from AA-minus to BBB-plus; class C notes, from BBB to BB; and $16.7 million of preference shares, from BB-minus to CCC. The class A notes were removed from Rating Watch Negative, while classes B and C remain there. Independence II is composed of approximately 48.4% residential mortgage-backed securities, 14.3% asset-backed securities, 32.1% commercial MBS, 0.4% real estate investment trusts, and 4.8% CDOs. Fitch attributed the downgrades to a deterioration of collateral quality. "Collateral in the manufactured housing sector that has been downgraded to or below CCC-plus since August 2003 equals $26.3 million (6.6%)," the rating agency said. "Assets rated BB-plus or lower represented approximately 17.72% as of June 30, 2003, and increased to 30.26% as of June 30, 2004."

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