Market value ABS CDOs have taken a beating from declines in the value of their underlying collateral. And now, the recent downgrades on synthetic CLOs backed by total return swaps have demonstrated that falling prices in the loan market have put CLO structures at risk too.

From the end of June 2007 through Jan. 16, the average bid on the leverage loan market fell from $98.74 to $92.49 (a 6.4% drop) while the average bid on the most liquid leveraged loans, the SMi U.S. 100, fell from $100.02 to $94.36 (a 5.7% drop), according to the Loan Syndications and Trading Association/ Loan Pricing Corp., whose mark-to-market pricing data was cited in a Fitch Ratings report.

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