Primus: More Downward Pressure - Analyst Blog
Headquartered in Bermuda,
Primus Guaranty Ltd. (
PRS) sells credit swaps as protection against the risk of default on investment grade obligations. The primary purchasers of credit swaps are commercial and investment banks as well as portfolio managers, insurance companies, and other financial institutions seeking to reduce the credit risk exposure in their fixed-income security portfolios.
During October 2008, Primus Financial, the issuing subsidiary was downgraded by both S&P and Moody's to AA+ and AA1 (from AAA and Aaa ) respectively, with negative implications. Additionally, S&P and Moody's downgraded the 7% notes issued by Primus Guaranty to "BB" and "BA1", respectively.
In view of the challenging conditions, the company has decided to manage its business in the amortization mode versus the growth mode earlier. After reviewing the results, we are maintaining our Sell recommendation on the shares.
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