According to some analysts investment grade (IG) average CDOs (as well as other credit products) could be vulnerable to a corporate spread blow out and exposure to the airline and insurance industries. The IG CDO vulnerability to airline and insurance exposure is similar to other deals, but what is unique is the very thin amount of equity (about 3%) supporting these transactions and the possibility of large industry and industry-related exposure that is moderately capped by the rating agencies.

Below is a comment from Lang Gibson, head of structured credit products research at Banc of America, giving his thoughts on potential effects on existing IG CDOs as a result of the widening corporate spreads:

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