Two classes of notes issued by Varick Structured Asset Fund Ltd., a collateralized debt obligation supported partly by residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.Classes A-1 and A-2 were downgraded from B/DR2 to B-minus/DR2. The transaction, a CDO managed by Clinton Group Inc., is supported by a diversified portfolio of asset-backed securities, RMBS, and CMBS. Fitch attributed the downgrades to continued deterioration of the credit quality of the collateral and the adverse effects of its interest rate hedge. "Since the last rating action on Aug. 29, 2005, the portfolio has experienced significant writedown activity, totaling over $8 million, as well as several downgrades, resulting in a steadily worsening weighted average rating factor," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

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