Bermuda’s XL Capital Ltd announced it made an investment of $72.75 million last week in Primus Guaranty, Ltd., a newly formed company specializing in providing credit risk protection for individual corporations, sovereigns and financial institutions.
XL is the lead investor in a group of four financial institutions, with approximately 43% ownership of Primus in equity capital. The announcement stated that “XL’s share of Primus’ results will be part of XL’s ‘equity in earnings of affiliates’ income statement line item.”
Commenting on the investment, Robert Lusardi, CEO of XL’s Financial Products and Services operations, stated “We believe that credit risk protection will be one of the fastest growing risk transfer markets over the next five years. Credit risk is inherent in corporate trade and buyer/supplier transactions, is embedded in virtually every structured finance transaction and is the dominant issue in the corporate loan and investing communities. The market for credit risk protection, as measured by the credit default swap market, has expanded exponentially over the past couple of years. Primus is a new entrant with large financial capacity and the highest counter-party ratings.”
Lusardi and XL Chairman Michael Esposito, Jr. will both be members of Primus Board of Directors. Esposito will also serve as the Chairman of Primus and Lusardi will serve as a director and Chairman of the Finance and Investment Committee.
XL’s announcement stressed that Primus will begin operations as “the only triple-A rated company dedicated to providing investment grade credit risk protection to derivatives dealers and credit portfolio managers.” Its plan is to “invest in credit risk by selling protection to its customers in the form of credit default swaps on more than 1,200 investment-grade corporates and sovereigns.”|”xl, invests, $72.75, million, in, primus, guaranty
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