Fitch Ratings Downgrades Spices Finance Limited Series 2 -- PEAS -- Notes

    LONDON--April 24, 2002--Fitch Ratings has downgraded Spices Finance Limited Series 2 (PEAS) notes to 'CCC+' from 'BB-' and removed the notes from Rating Watch Negative.
    The issuer, Spices Finance Limited, a special purpose vehicle incorporated with limited liability in Jersey, currently provides protection to Morgan Stanley on a US$323 million reference portfolio of 93 reference entities with a weighted-average credit quality equivalent to a 'BBB' rating using Fitch's rating factors. The reference portfolio amount has decreased from the initial US$330 million following credit events on Enron and Railtrack.
    Fitch's rating action results from the actual loss determinations on Enron and Railtrack. In particular, the valuation for Enron resulted in lower recoveries than the range indicated by initial market expectations. The reference portfolio has also seen significant deterioration as evidenced by the fact that the portfolio, initially all investment grade, now contains seven sub-investment grade names. The weighted-average Fitch Factor for the portfolio has increased from 12.98 in September 2001 when the deal was issued to 16.45 as of April 24, 2002. Fitch will closely monitor any changes to the existing portfolio and will take further action as required.