As collateral managers continue searching for juicier arbitrage, raw assets, such as unrated commercial whole loans, could be the next target for innovative collateralized debt obligations, with the first deals hitting the market first quarter 2001. Other potential targets include home-equity loans, equipment leases or franchise loans. Just about any other asset type currently securitized in the ABS market is ripe for these CDOs, if they start getting done, sources said.

"It's almost like combining conventional securitization into the CDO itself," said Steven Kolyer, a partner at Clifford Chance Rogers & Wells. "Normally what goes into CDOs are tradeable, existing securities and bank loans. Now there is an increased interest in including raw financial assets.'"

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