Centre Group Sponsors an Innovative High Yield CLO; Use of Insurance, Credit Swaps Permits Wider Distribution of Credit Risk.

Business Editors

HAMILTON, Bermuda--(BUSINESS WIRE)--July 31, 2000

Centre Group, continuing to increase its penetration into the asset-backed structured finance markets, has sponsored an innovative collateralized loan obligation (CLO), Castle Harbor CLO Limited.

The transaction structure, in which Centre insures a $300 million pool of high-yield bank loans against potential defaults of up to $50 million, was developed jointly with Bank of America's Structured Credit Products group. Bank of America, N.A. will hold the loans, which will be selected and managed by asset manager Springfield Asset Management LLC.

The transaction is innovative in at least two respects. First, Bank of America financed 100 percent of the $300 million portfolio, assuming full risk on the $250 million senior tranche of the portfolio in the process. Second, Centre issued insurance protection for $50 million to Castle Harbor CLO Limited, the Cayman Islands-based special purpose corporation (SPC) created to hold the $300 million bank loan portfolio through credit swaps. This use of an insurance policy to represent the first loss component of a CLO creates a synthetic structure that expands the possibilities for distribution of credit risk through traditional securitization vehicles.

The structure takes advantage of favorable risk-adjusted yield opportunities currently available for high-yield bank loans and leverages the participating institutions' respective strengths. The transaction allows Centre to sponsor an innovative, highly structured insurance product, Bank of America to increase its presence in the structured credit products market and Springfield to offer its expertise as portfolio manager for the bank loan portfolio.

"Although this is the first time Centre has used this particular structure, we have participated in a number of equity and mezzanine interests in collaterized debt obligation (CDO) transactions comprised of various different asset classes including emerging markets securities, high-yield bonds and asset-backed securities. This is a growing business area for us in North America, Europe and Asia," said Paul Hellmers, CEO of Centre Solutions (Bermuda) Ltd.

"The combined efforts of Bank of America, Centre and Springfield to create Castle Harbor CLO Limited demonstrates the solutions offered by the structured credit products market. This transaction structure underscores the convergence of traditional credit derivative, securitization, and insurance technology and reflects the broad base of structural opportunities this market offers," said Daniel E. Kaiser, Managing Director in Bank of America's Structured Credit Products group.

Springfield will provide asset selection and management services through its newly created bank loan group. While this represents the first such transaction for Springfield Asset Management, it is representative of the flexibility Springfield brings to this business. The team Springfield assigned to this transaction has extensive experience managing well over a billion dollars of bank loans through a variety of vehicles. Springfield currently manages between $30 - $40 billion in various securities on a leveraged basis.

"We are extremely excited to be involved in this transaction with Centre and Bank of America," said Springfield CEO Gregory Sachs. "We see tremendous opportunities currently in the structured product market, and we will be actively involved as the market grows."

"Springfield's expertise in selecting a diversified pool of high yield bank loans was invaluable," Hellmers said. "In addition, Springfield agreed to align their economic interests in the transaction with Centre's."

Bank of America was able to commit long-term, floating-rate financing cost effectively because its senior risk position required only modest capital and fit within the requirements of Castle Harbor CLO Limited. Additionally, Centre's insurance and AA rating allowed Bank of America to finance the subordinated position. Bank of America retains complete flexibility to source financing for the reference portfolio in any fashion it deems most efficient.

Centre, a member of Zurich Financial Services, is a full-service provider of customized insurance, reinsurance, structured finance and risk management programs. Centre has offices in Bermuda, Dublin, Hong Kong, London, New Jersey, New York, San Francisco, Sydney and Zurich. Centre reported $1.1 billion of capital and surplus, and US$4.6 billion of total assets as of year-end 1999, with total revenues of $600 million in the year ended December 31, 1998. The Centre Group of companies is rated "A" or "Excellent" by A.M. Best Company and "AA" or "Excellent" by Standard & Poor's Corporation for its claims-paying ability.

The Zurich Financial Services Group is a global leader in the financial services industry, providing its customers with solutions in the area of financial protection and asset accumulation. The Group concentrates its activities in four core businesses: non-life and life insurance, reinsurance and asset management. Headquartered in Zurich, Switzerland, the Group's worldwide presence builds on strong positions in its three key markets - the United States, the United Kingdom and Switzerland. It has offices in more than 60 countries reaching over 35 million customers and employing 68,000 people. Based on consolidated figures for 1999, the Group achieved gross premiums of USD 48 billion. This amount includes insurance deposits as well as premiums from the Farmers Exchanges. The net income amounted to USD 3.26 billion. On December 31, 1999, the Group had USD 442 billion of assets under management of which USD 264 billion represent funds managed for third-party institutional and retail customers.

Bank of America, with $656 billion in assets, is the largest bank in the United States. It has full-service operations in 21 states and the District of Columbia and provides financial products and services to 30 million households and two million businesses, as well as providing international corporate financial services for business transactions in 190 countries. The company's stock (ticker: BAC) is listed on the New York, Pacific and London stock exchanges, and certain shares are listed on the Tokyo Stock Exchange. Further investor information can be found at www.bankofamerica.com/investor.