Although spreads in CDOs have moved out since Sept. 11, it is no secret that the market has been having credit problems for quite some time. Lately, however, deals with exposure to the airline, gaming, lodging, and tourism industries, as well as the insurance industry, have borne the brunt of rating agency action.

Seventeen of the 60 European CDOs that Fitch has rated were deemed to have exposure to the troubled sectors. For now the group has placed three classes from two synthetic transactions on ratings watch negative: the class B and C tranches C- Strategic Asset Redeployment Program 1999-1 (Citistar); and the C class of IKB Deutsche Industriebank AG. In the U.S., Fitch has placed 68 classes of 26 CDO transactions on ratings watch negative.

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