After Merrill's Sale of Bad Debt, Few Have Followed

But a source with knowledge of Lone Star's plans said managers of the Dallas-based firm "have an appetite for more" acquisitions. And analysts say that other big investment groups have been lining up funds to make opportunistic purchases.

"There's no shortage of distressed investors who would love to scoop these things up on the cheap, and if those buyers are willing to come up a little bit on price, maybe we'll see some transactions," said Bill Fitzpatrick, an analyst at Optique Capital Management in Milwaukee. "But this market is all about the decline in housing prices. If that continues to accelerate, these things will be worth less and less."

Lone Star mitigated much of that risk in its deal with Merrill by getting the firm to finance 75 percent of the deal. The collateral for the loan was the CDO portfolio itself, so if the securities turn out to be worthless, Merrill will bear most of the loss.

Even if terms from other sellers are less generous, private-equity groups and hedge funds still may be willing to take a chance on CDOs. Their clients often are locked into their investments for a number of years, which tends to make them less sensitive to quarterly fluctuations in asset values.

"The thing you would have to worry about if they had to mark them down significantly is what that would mean for future opportunistic capital raises," said analyst Roger Smith, who follows money managers and investment firms for Fox-Pitt Kelton in New York. "But in five years, I wouldn't be surprised if we looked back and a lot of people said, 'Oh my god, look how much money we made. And look how obvious it was.' "

But they'd have to find a seller first.

Staff writer David Cho in Washington contributed to this report.