The ground beneath the corporate-loan market is beginning to tremble, as some investors have been forced to dump loans onto the market, and Wall Street is bracing to find out whether it's a full-blown earthquake or just a tremor.

In the past few days, several large loan portfolios have been put up for auction in the secondary-loan market, sounding more than a few alarms. Yesterday, a $265 million portfolio of leveraged loans followed a $430 million one on Tuesday, seeking cash bids. Another smaller one had gone up for sale on Monday.

What’s more is that some loan-market players are scrambling to restructure their complex portfolios or sell them before they are forced to by the provisions of the loans.

"It's like seeing one enemy over the hill and not knowing how many are behind him," says Chris Taggert, senior loan strategist for Credit Sights. "It's happening at the worst possible time."

What's so unsettling about this? Some in the credit industry fear that certain collateralized loan obligations, which are buckets of corporate loans repackaged and sold as another security, may just be the next shoe to drop in the already battered debt market. As the value of the loans issued to finance corporate buyouts drops, the value of the so-called market-value C.L.O.'s that bought them drops, too.

In some cases, as with the portfolios auctioned this week, the buyers are forced to liquidate their loans when certain prices are triggered. Fitch Ratings downgraded $355 million worth of C.L.O.'s earlier this week after prices triggered their liquidation.

Even more troublesome is that they are entering a highly illiquid market. Investors, already bruised by credit losses and worried about more defaults, are few and far between in the secondary leveraged loan market.  

If these are just the first liquidations of many more to come, the market value for leveraged loans in general will likely plummet even further.

In fact, one loan dealer has already heard from many others looking to unload their loan portfolios in private transactions. In total, this person says, some $1.2 billion worth of loans have come up for sale this week in public and private auctions, versus just $30 million last week.

Others are seeking ways to restructure their troubled pools on their own before being forced to sell them at a loss. Fitch said that several funds with portfolios nearing the liquidation trigger are trying to recapitalize them with other sources of cash.

No one is quite sure yet just how low the market will go. The average loan in the secondary market trades for just 88 cents on the dollar, which is down 6 cents since the start of this year, and a record low.

"Pricing is a reflection of where you can finance these assets," said Carlos Mendez, senior managing director at Institutional Credit Partners, a structured-credit investment firm with $13 billion under management. "Without new C.L.O.'s coming to market and existing loan structures with limited reinvestment capacity, there are few natural buyers."

Adding to the complexity, many of the loans in these portfolios are from perfectly financially sound issues. The debt in yesterday's pool reportedly included paper from Chrysler, Mylan Laboratories, and Fender Musical Instruments.

Of course, highly rated debt that's trading for junk prices represents a buying opportunity to some distressed investors. "There’s a tremendous opportunity to pick through these portfolios," says Mendez.