When compared to the ABS CDO market, the CLO market has remained relatively intact, despite the liquidity dry-up in the corporate credit market this past summer and heightened concern about subprime RMBS contagion. But while new issuance appears to be picking up, an expected increase in corporate defaults could create future complications for these vehicles.

Standard & Poor's predicts that default rates will escalate over the next year based on changes in the credit-pricing environment and a slowing of the economy, as well as a rating mix with a "record high representation of speculative-grade ratings,"the rating agency said in a recent report.

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