S&P Rates Prime Capital Floating-Rate Notes.Business Editors NEW YORK--(BUSINESS WIRE)--Standard & Poor's Jan. 31, 2001--Standard & Poor's today assigned its double-'B' rating to PRIME Capital CalQuake & EuroWind Ltd.'s (PRIME CQEW) $129 million floating-rate notes, which are due in 2004 and are parametrically linked to the occurrence of European windstorms and California earthquakes. At the same time, Standard & Poor's assigned its double-'B'-plus rating to Prime Capital Hurricane Ltd.'s (PRIME H) $159 million floating-rate notes, which are also due in 2004 and are parametrically linked to the occurrence of Atlantic U.S. hurricanes. The notes are the first entry into the catastrophe bond catastrophe bond A debt security with a payoff tied to the relative severity of a natural disaster such as a hurricane or earthquake. Bondholders are paid with insurance premiums but may have to accept reduced principal repayment in the event the specified market by German reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. Munchener Ruckversicherungs-Gesellschaft AG (Munich Re), which is the world's largest reinsurer based on net premiums written and has an outstanding reputation. The notes provide three-year, fully collateralized cover. Portions of Munich Re's quake and wind exposures have been transferred to the holders of the notes through an ISDA-based contract with each of the issuers--PRIME CEW CEW Center for the Education of Women (University of Michigan) CEW Controlled Environment Warehouse CEW Christian Experience Weekend CEW Continuing Education Workshop CEW Centimetric Early Warning (radar) and PRIME H--two newly established, special-purpose exempted companies domiciled in the Cayman Islands. The ratings reflect the results of peril modeling by Risk Management Solutions (RMS), the financial strength of Munich Re (triple-'A' financial strength rating), and the swap guarantee provided by Merrill Lynch & Co. Inc. (Merrill Lynch; double-'A'-minus financial strength rating). Standard & Poor's reviewed RMS's original analyses of wind patterns over Europe and the east coast of the U.S. and of the seismogeological structure underlying California. Following RMS's model, the annual probabilities of attachment of the PRIME CQEW notes and the PRIME H notes are 1.69% and 1.46%, respectively. Munich Re's premium-like payments to the issuers support the coupons of the notes. Each issuer has put note proceeds into a collateral account invested in high-quality assets with final maturities not exceeding 15 years. Each will swap the total return with a counterparty guaranteed by Merrill Lynch in exchange for quarterly LIBOR-minus-0.12% interest payments and a principal guarantee. The coupon on the PRIME CQEW notes is LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). plus 7.50%. The coupon on the PRIME H notes is LIBOR plus 6.50%. Standard & Poor's has reviewed the structure of the various corporate entities involved in the transaction and determined that they meet Standard & Poor's criteria for special-purpose vehicles and that the trust has been appropriately structured to provide a security interest to the noteholders. Event payments associated with California earthquake will depend parametrically on the pronouncement by the National Earthquake Information Center--an agency of the U.S. Geological Survey--as to the hypocenter hy·po·cen·ter n. The surface position directly beneath the center of a nuclear explosion. hy  po·cen , epicenter, depth, and moment magnitude. Similarly, event payments associated with Atlantic hurricane in the Miami or New York New York, state, United StatesNew York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of areas will depend parametrically on the pronouncement by the National Hurricane Center The U.S. National Hurricane Center, located at Florida International University in Miami, Florida, is the division of National Weather Service's Tropical Prediction Center responsible for tracking and predicting the likely behavior of tropical depressions, tropical storms and Tropical Prediction Center, a branch of the National Oceanic and Atmospheric Association, as to the point of landfall land·fall n. 1. The act or an instance of sighting or reaching land after a voyage or flight. 2. The land sighted or reached after a voyage or flight. and central pressure at landfall. Event payments associated with European windstorm--including a thunderstorm thunderstorm, violent, local atmospheric disturbance accompanied by lightning, thunder, and heavy rain, often by strong gusts of wind, and sometimes by hail. , cyclone, gale, tempest, and blizzard--will depend on a proprietary formulaic index based on wind-speed data from more than 600 wind-speed recording stations operated by one of the following national agencies: Meteo-France, Deutscher Wetterdienst, Het Koninklijk Nederlands Meteorologisch Instituut, Koninklijk Meteorologisch Instituut van Belgie, and the U.K. Meteorological Office. The Munich Re Group consists of Munich Re and its subsidiaries engaged in reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , primary insurance, and asset management. In 2000, Munich Re, incorporated in Munich in 1880, wrote euro 10.955 billion in gross premiums in its property/casualty, life, and health reinsurance lines. In 1999 Munich Re Group had gross premiums of Eur27.413 billion on a consolidated basis. At the close of 1999, Munich Re Group had total assets of Eur179.880 billion and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. of Eur18.454 billion, each on a consolidated basis. As of Nov. 14, 2000 Munich Re had a market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. of Eur64.753 million. The notes were structured by Munich Re Capital Markets and underwritten by Goldman, Sachs & Co., Lehman Brothers Inc., and American Re Securities Corp, Standard & Poor's said. -- CreditWire Copyright 2001, Standard & Poor's Ratings Services |
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