This excerpt taken from the WEN 10-K filed Mar 1, 2007.
The narrowing of CDO spreads could make it difficult for DCM to launch new CDOs.
It is important for DCM to be able to launch new CDO products from time to time, both to expand its CDO activities (which are a major part of DCMs business) and to replace existing CDOs as they are terminated or mature. The ability to launch new CDOs is dependent on, among other factors, the amount by which the interest earned on the collateral held by the CDO (such as bank loans or corporate bonds) exceeds the interest payable by the CDO on the debt obligations it issues to investors. If these spreads are not wide enough, the proposed CDO will not be attractive to investors and thus cannot be launched. There may be sustained periods when such spreads will not be sufficient for DCM to launch new CDO products, which could have a material adverse effect on DCMs business.