In response to continued downgrades in the 1998 and 1999 vintages, and the current economic slowdown, collateralized debt obligations in the past year have been coming out of the gate more cushioned and less leveraged, and often with structural enhancements that "apply the breaks" on deals showing trouble early on, industry sources said.

"The credit pendulum has clearly swung to a more conservative level," said David Tesher, a managing director in the CDO group at Standard & Poor's.

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