2008-07-11 22:56:08 -

- Fitch Ratings has placed the following classes of variable floating-rate notes from MSC 2007-SRR3, Ltd./LLC (MSC 2007-SRR3) on Rating Watch Negative:

--$10,541,250 class K 'BBB-';

--$15,854,040 class L 'BBB-';

--$9,491,810 class M 'BB+';

--$4,000,990 class N 'BB';

--$3,007,770 class O 'BB-';

--$3,495,010 class P 'B+';

--$2,501,790 class Q 'B';

--$1,499,200 class

R 'B-'.

The placement of the classes on RWN reflects the decline in the portfolio credit quality resulting from Fitch's downgrades of five tranches within five CMBS B-Piece resecuritizations (10.7% of the portfolio). MSC 2007-SRR3 represents a synthetic collateralized debt obligation (CDO) transaction that references a static portfolio consisting of 89.3% of commercial mortgage backed securities (CMBS) and 10.7% of CMBS B-Piece resecuritizations. The transaction is designed to provide credit protection for realized losses on a reference portfolio through a credit default swap (CDS) between the issuer and the swap counterparty, Morgan Stanley Capital Services Inc. (MSCS).

The initial ratings were based on the quality of the portfolio assets which had a Fitch weighted average rating of 'BBB/BBB-', the credit enhancement provided by the subordination for each tranche and the protection incorporated within the structure. After accounting for the downgrades to approximately 10.7% of the collateral, which are CMBS B-Piece resecuritizations, the average rating is nearing 'BBB-' and no longer supports the ratings for the classes placed on Rating Watch Negative.

Proceeds from the securities are invested in a pool of eligible investments, which are protected through the total return swap agreement (TRS) between the issuer and MSCS, the TRS counterparty. The payment obligations of the TRS counterparty are guaranteed by Morgan Stanley, the swap counterparty guarantor. Under the TRS agreement, MSCS will make periodic interest payments to the issuer and pay any depreciation in market value with respect to eligible collateral upon its disposition to the issuer, and the issuer will pay MSCS all the interest and similar amounts payable with respect to the eligible collateral. In addition, the issuer will pay to MSCS any appreciation in market value of the eligible collateral upon its disposition.

Fitch is reviewing its structured finance CDO approach and will comment separately on any changes and potential rating impact at a later date. The resolution of this Rating Watch Negative action will reflect the current portfolio as well as the structural features of the transactions and will follow the release of Fitch's revised SF CDO rating criteria.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, New York
Karen Trebach, +1-212-908-0215
Jenny Story, +1-212-908-0302
Sandro Scenga, +1-212-908-0278 (Media Relations)