Katonah Capital Proposes Replacement Portfolio Manager for Funds

NEW YORK – March 28, 2005 – Katonah Capital, L.L.C. announced today that it has sent proposals for replacement portfolio managers for the various Katonah Capital collateralized debt obligations (CDO) funds to JPMorgan Chase Bank, National Association (formerly known as JPMorgan Chase Bank), the funds’ trustee.

Katonah Capital has proposed that Sankaty Advisors, LLC and certain of its key employees will become the replacement portfolio managers for Katonah II, Ltd., Katonah III, Ltd., and Katonah IV, Ltd. Katonah Capital has also proposed that the corporate debt group within Blackstone Debt Advisors L.P., an affiliate of Blackstone Group Holdings L.P., will act as replacement portfolio manager for Katonah I, Ltd. and Katonah VI, Ltd. Additionally, Katonah Capital has proposed INVESCO Senior Secured Management, Inc. as replacement portfolio manager for Katonah V, Ltd.

The approval by a majority of the equity investors in Katonah III, IV and V is required to approve the respective replacement portfolio managers. The approval by a majority of the holders of Class A Notes and the equity investors is required to approve the replacement portfolio managers for Katonah VI. In the case of Katonah I, the consent of the fund and MBIA as insurer is required to approve the replacement portfolio manager for Katonah I. No consent is required for the replacement portfolio manager for Katonah II. If the required approvals are obtained, Katonah Capital intends to enter into sub-advisory agreements with the three firms. Each proposal is expected to take effect promptly after receipt of the necessary approvals. In the future, Katonah Capital may also seek approval from investors to an assignment of the management agreements for the Katonah funds to Sankaty Advisors, LLC, Blackstone Debt Advisors L.P. and INVESCO Senior Secured Management, Inc.

A spokesman for Katonah Capital said: “The recommendations we are making to the investors in the Katonah funds are the result of thorough and diligent review of options for the management of the funds following the sudden departure of our portfolio manager at the end of January. In particular, we have engaged in an extensive dialogue with the principal equity investors in each fund as to their preferred course of action. Given tightening interest rate spreads and the intense competition for loan and bond allocations, our investors feel that CDO investment managers with significant scale and whose organizations have broad relationships in the investment community offer the best alternative for the continued management of the funds.”

A spokesman for Kohlberg & Co., LLC, which is the corporate parent of Katonah Capital, and whose affiliates are the largest equity investor in the Katonah funds, said: “We are extremely pleased with the quality of the three firms whose senior investment teams have agreed to manage the Katonah funds. Our confidence in these firms is demonstrated by the fact that Kohlberg affiliates have not, and will, not sell any of our equity investments in the various funds as part of this transition process. These firms will therefore be overseeing our investments as well as those of our fellow investors.”

Katonah Capital, LLC is an asset management company formed in December 1999 focusing on the below-investment-grade asset classes. Katonah Capital specializes in alternative investment solutions, which include CDOs and other leveraged investments, managed accounts, and direct investment in the high yield bond, leveraged loan, and mezzanine markets. Katonah Capital also provides advisory and sub-advisory services within these areas of expertise. Katonah Capital is a wholly-owned subsidiary of Kohlberg & Company, LLC.