Sellers Examine Trading Vehicles
Credit protection sellers have started inquiring about independent trading vehicles for selling credit protection, according to Nik Khakee, director in structured finance at Standard & Poor's in New York.
Operating companies are structured to ensure their credit ratings remain AAA to the maturity of their longest trade, which it makes it more stable than trading with other vehicles, such as managed CDOs, which are rated at a particular point in time and are subject to ratings migration, explained Khakee.
The only one of these vehicles rated by S&P so far is Primus, which was set up about a year ago, said Khakee. Primus is backed by XL Capital, Radian Group, CalPERS/PCG Corporate Partners and AEGON USA and is rated AAA by both S&P and Moody's Investors Service.