Deal performance in the Australian structured finance market had been less favorable in the second quarter of 2003 then the first quarter, according to Standard & Poor's in reviewing the methodology. In fact, in the second quarter the market experienced 10 downgrades. S&P mainly attributed these to rating actions on four counterparties, adding that the underlying collateral performance remains strong.

The basis for the seven residential mortgage-backed securities downgrades in the second quarter was attributable to the exposure to Royal & Sun Alliance Lenders Mortgage insurance Ltd (RSALMI). Following the financial strength and counterparty ratings downgrade of RSALMI to A-' from A+' on May 22, 2003, the RAMS Mortgage Corp Ltd Series 6E, 7E, 8,9,10,11 and RMS Trust 2002-1 subordinated bonds were lowered to A-' from AA-' on June 3.

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