The credit-wary environment that took hold of the loan market at the end of 2000 produced a resurging interest among lenders in asset-based loans. Now, it seems that this interest is being taken a step further as asset-based lenders look at ways of taking their asset-based loans off-balance-sheet by packaging them in CLOs.

Dan Gates, senior vice-president in the bank loan ratings group at Moody's Investors Service, says that the increased interest in asset-based lending is largely driven by a need to "have better control over security and reduce losses." With credit concerns intensifying, especially with default rates on the rise, lenders are more vigilantly monitoring how and to whom they lend their capital.

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