Though the recent credit hits that plagued the franchise loan sector were localized events - generally not viewed as problems inherent to the sector - investor confidence has slid and liquidity issues are still at stake, market sources said.

Further, with just two deals for $580 so far this year, issuance is well below last year's pace of four deals for $800 million by the end of the second quarter. Still, going forward, particularly for the coming quarter, issuance looks fairly robust, with players like Franchise Finance Corp. of America, Falcon Financial, Amresco and CNL American Properties Fund with deals in the works.

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