Falling prices are forcing total-rate-of-return market-value CLOs to liquidate their underlying assets. These unwinding CLOs could present opportunities for investors, but could also drive prices down even further. And sources say the loan market has already hit historical lows.

UBS and Wachovia are reportedly liquidating $264.9 million and $446 million in CLO paper, respectively, and at steep discounts. Citi could also liquidate roughly $1.5 billion in CLOs. Fitch Ratings recently downgraded roughly two dozen CLOs structured by Citi and said in a report that three of the bank's CLOs are liquidating. However, a Citi spokesperson denied that the funds are liquidating and said the bank is in discussions to restructure all of these deals in conjunction with additional cash injections from existing investors. Some of the bank's market-value TRR CLOs hit their termination triggers, the spokesperson said, but added that it is unlikely these CLOs will liquidate, assuming the restructuring is successful. Bank of America, Goldman Sachs and Morgan Stanley could also be forced to liquidate TRR CLO assets, sources said.

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