Primus launches boutique credit derivatives shop

03/14/2002
Reuters English News Service
© Reuters Limited 2002.

NEW YORK, March 14 (Reuters) — Former brokers at Wall Street dealers Salomon Smith Barney and Bank of America launched on Thursday what they claim is the first boutique shop focusing solely on selling default swaps in the fast-growing credit derivatives market.

Primus Financial Products Inc. is focusing on selling credit protection and managing a portfolio of investment grade corporate and sovereign default swaps. It aims to take limited positions in a broad array of credits, said Joseph Bauman, the firm's chief financial officer.

Bauman is former chairman of the International Swaps and Derivatives Association and also former head of derivatives sales and structuring at Bank of America.

Default swaps are insurance-like contracts that provide a buyer with protection against a company or country defaulting on its debt.

Primus has received a triple-A rating from both Standard & Poor's and Moody's Investors Service, the firm said.

According to the Bank for International Settlements, the credit derivatives market has quintupled for the three years through June 2001 to a notional size of $693 billion in outstanding contracts.

Primus has $155 million in equity capitalization under the parent company Primus Guaranty, Ltd. The primary investors include XL Capital Ltd. , Radian Group Inc. , CalPERS/PCG Corporate Partners LLC and AEGON USA.

Primus, which hopes to sell $5 billion in default swaps during its first year, also has arranged a $115 million excess of loss insurance policy from Radian Reinsurance Inc, a subsidiary of Radian Group.

Thomas Jasper, the former managing director and global treasurer at Salomon Smith Barney Holdings Inc., will serve as chief executive, while Charles Truett, former senior risk management and credit officer at Bank of America, will serve as chief risk officer.