The nature of CLO exposure to troubled U.S. auto parts supplier Delphi Corp. shows how much those deals are, and have been, thirsty for loans that will offer higher-than-average spreads, according to Standard & Poor's.

Delphi's Oct. 8 bankruptcy filing is largely not expected to immediately affect U.S. cashflow CDOs with exposure to Delphi, in fact, Delphi loans are largely trading above par. But interestingly, S&P analysts found that some 75% of cashflow CDOs in the U.S. holding Delphi securities were CLOs. And in those CLOs, almost half of the securities constituting Delphi exposure were term loans purchased during the week of June 20 - when, as a result, the majority of those CLOs enjoyed a one-to-four basis point jump in their portfolio weighted average spreads.

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