Sandler O'Neill is keeping a toe-hold in the CDO market, despite the events of Sept. 11, via a $766.25 million arbitrage cashflow trust-preferred securities-backed CDO. The firm will co-lead MM Community Funding II CDO with Salomon Smith Barney, reports IFR Asset-Backed Securities. The trade priced at +100 basis points over six month Libor (A/L 12.8y) on the triple-A notes. The transaction is backed by new issue trust-preferred securities from approximately 50 regional banks. The single-A cleared at +220 (modified duration 11y). The equity in this deal has an approximate 19% total return, sources said.