If one debt instrument could be designated a long shot in this environment, distressed debt CLOs might be the frontrunner. So what's the story with the two deals on watch for upgrade - a great rarity for any CDO - that are backed by, primarily, distressed loans?

After 12 months of record-making downgrades, more than one investor probably flinched when Moody's Investors Service issued an upgrade watch last week for a few classes in both ARK II CLO 2001-1 and Endeavour LLC CDOs. While a watch doesn't translate into an upgrade per se, insiders believe its quite likely. Recoveries for both vehicles have been much more quick to actualize than even the ratings agencies predicted.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.