Fitch Affirms 9 Classes of ACA ABS 2003-2, Limited

Fitch Ratings has affirmed nine classes of notes issued by ACA ABS 2003-2, Limited (ACA 2003-2), as follows:

--$39,496,883 class A-1SD notes at 'Csf';

--$84,925,038 class A-1SU notes at 'Csf';

--$2,696,033 class A-1SW notes at 'Csf';

--$108,000,000 class A-1J notes at 'Csf';

--$51,000,000 class A-2 notes at 'Csf';

--$44,397,036 class A-3 notes at 'Csf';

--$9,431,457 class B-F notes at 'Csf';

--$21,041,933 class B-V notes at 'Csf';

--$6,053,342 class C notes at 'Csf'.

KEY RATING DRIVERS

The rating affirmations on all classes of notes are due to the amount of expected losses from the distressed and defaulted portion of collateral (rated 'CCsf' and lower) in the current portfolio exceeding each note's respective credit enhancement (CE) level. As such, Fitch expects the full repayment of principal and deferred interest (in the case of deferrable classes) prior to or at maturity appears highly unlikely, therefore default seems inevitable for all nine classes.

Since Fitch's last rating review in January 2013, the class A-1SD, A-1SU, and A-1SW (collectively, class A-1S) notes received approximately $48 million in principal proceeds. Although the CE to the A-1S notes has subsequently increased as a result of this deleveraging, it still remains significantly below the expected losses. In addition, interest collections are currently unable to support the full payment of interest due on the class A-1S notes, as well as the other two non-deferrable classes - the class A-1J and class A-2 notes. Over the last four payment dates, principal proceeds have been used to cover interest shortfalls to these classes. The remaining four deferrable classes - the class A-3, B-F, B-V, and class C notes - have not received any distributions over the last year and remain significantly undercollateralized.

RATING SENSITIVITIES

This transaction has limited sensitivity to further negative migration given the distressed ratings of the notes. However, there is potential for non-deferrable classes to be downgraded to 'Dsf' should they experience any interest payment shortfalls.

This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. Neither a cash flow model framework nor Fitch's Structured Finance Portfolio Credit Model was included in this review, as expected losses from defaulted and distressed collateral exceed the CE level of the senior-most class of notes. Fitch believes that the probability of default can be evaluated without factoring potential losses from the performing portion of the portfolio.

ACA ABS 2003-2 is a cash flow structured finance collateralized debt obligation (SF CDO) that closed on Nov. 6, 2003 and was managed by ACA Management, LLC until April 2008, when management duties were transferred to Solidus Capital, LLC. Presently the portfolio is comprised of residential mortgage-backed securities (61.8%), SF CDOs (22.8%), real estate investment trust (REIT) securities (11.7%), and commercial mortgage-backed securities (3.7%), from the 2002 through 2006 vintages.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'Global Rating Criteria for Structured Finance CDOs' (Sept. 12, 2013).

Applicable Criteria and Related Research:

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813392

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