With economic hardships still throwing punches at the high-yield market, more European market players are turning a keen eye to leveraged loans. As a result, CDO managers say that there has been an increase in appetite as well as opportunity over the past year for these types of CDOs.

Last year Standard & Poor's rated a total of six CDOs backed by leveraged loans. Among those, the leverage loan component for each transaction represented anywhere from 63% to 100% of the total portfolio, with a weighted average proportion of leveraged loans of about 88%. In the fourth quarter 2002, these transactions continued to perform satisfactorily, with Intercontinental CDO S.A. and Ecureuil Credit Plus CDO B.V. both ramping up and becoming effective.

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