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Pastimes : R. Harmon's Earth 101
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To: Lilian Debray who wrote (35)3/16/2000 9:15:00 AM
From: long-gone   of 183
 
Don'[t think I'd buy this year:
Earthquake Notes 'BB+'
NEW YORK--(BUSINESS WIRE)--Standard & Poor's--March 14, 2000--Standard & Poor's today assigned its double-'B'-plus rating to an issue of floating-rate notes whose payouts are linked to an index of California earthquakes.

The rating follows a structural analysis of the many parties to the transaction and the outcome of the peril modeling. Standard & Poor's reviewed an original analysis performed by Risk Management Solutions (RMS) of the geological structure underlying California. The estimated annual probability that monies in the collateral account will be needed to pay claims to the insured party is 1.13%, while the 22-month probability is 2.08%. These compare favorably with the default matrix Standard & Poor's uses to rate catastrophe and weather bonds (1.67% and 3.05%, respectively).

The issuer, Seismic Limited, is a Cayman Islands exempted company whose ordinary shares are held in charitable trust. The $145.5 million note proceeds have been placed in a collateral account and invested in high-quality assets with a 15-year final maturity. Seismic Limited will swap the total return of this account with a counterparty guaranteed by single-'A'-rated Lehman Brothers Holdings Inc. in exchange for LIBOR and a principal guarantee. (cont)
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