Primus Guaranty, Ltd. (NYSE:PRS) announced that its subsidiary, Primus
Financial Products, LLC ("Primus Financial”) has completed its third
credit mitigation transaction. Primus Financial assigned a portfolio of
credit swaps with its largest single counterparty, comprising notional
principal of $2.65 billion of bespoke tranche transactions and
approximately $250 million of single name credit swaps, to a newly
formed subsidiary which is wholly owned by Primus Financial. Primus
Financial paid its subsidiary an assignment fee of $100 million. The
subsidiary and the counterparty have agreed to restructure the portfolio
such that the single name credit swaps are terminated and the bespoke
tranche transactions are revised to reflect a new notional principal
totaling $1.75 billion. In addition, the attachment points on certain of
the restructured tranche transactions have been increased. The
subsidiary has paid the counterparty a restructuring fee of $10 million.
Future credit swap premiums payable by the counterparty on the
restructured portfolio are approximately $15 million less than the
future premiums on the portfolio prior to restructuring. The last
restructured tranche matures in December 2014.
Each of the three credit mitigation transactions included certain
reference entities which Primus Financial concluded had a high risk
profile. To date, Primus Financial has terminated approximately $2.5
billion of single-name credit swaps, and has capped its exposure to an
additional $2.9 billion of credit swaps, assigning them to wholly owned
subsidiaries. In aggregate, counterparties have received $31.5 million
to terminate or amend credit swaps and Primus Financial has paid net
assignment fees amounting to $126 million to its subsidiaries in these
transactions. Any capital remaining at the final maturity of the credit
swaps in the two subsidiaries will be returned to Primus Financial.
The company continues to discuss with its counterparties potential
credit mitigation transactions, as it actively manages its credit
protection portfolio in amortization. Primus Financial’s previously
announced strategy is to address certain concentration issues in a small
number of higher risk sectors, including insurance, building/development
and retail, among others, seeking to reduce the overall risk in Primus
Financial’s portfolio and thereby preserve its capital. No assurance can
be given that the company will be successful in completing risk
mitigation transactions or, if successful, that Primus Financial will
achieve the desired risk reductions in its portfolio.
About Primus Guaranty
Primus Guaranty, Ltd. is a Bermuda company with operations in New York,
Boston and London. Through its subsidiaries, the company is a leading
manager of corporate credit assets and provider of credit protection.
Primus manages assets in structured credit funds and operating
companies, across a range of asset classes – including investment grade,
high yield and leveraged loans – using both cash and synthetic
instruments.
Safe Harbor Statement
Some of the statements included in this press release and other
statements Primus Guaranty may make, particularly those anticipating
future financial performance, business prospects, growth and operating
strategies, market performance, valuations and similar matters, are
forward-looking statements that involve a number of assumptions, risks
and uncertainties, which change over time. For those statements, Primus
Guaranty claims the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation Reform
Act of 1995. Any such statements speak only as of the date they are
made, and Primus Guaranty assumes no duty to, and does not undertake to,
update any forward-looking statements. Actual results could differ
materially from those anticipated in forward-looking statements, and
future results could differ materially from historical performance. For
a discussion of the factors that could affect the company's actual
results please refer to the risk factors identified from time to time in
the company's SEC reports, including, but not limited to, Primus
Guaranty's Annual Report on Form 10-K, as filed with the U.S. Securities
and Exchange Commission.
