Shipping Bond Fund Ltd. Only Draws Bonds from Shipping Industry
A member of the Centre Group and TuftonOceanic have completed what is believed to be the first collateralized debt obligation (CDO) comprised entirely of high-yield shipping bonds. The $50 million CDO, Shipping Bond Fund Ltd., is unique due to its size and the fact that it selected assets solely from a select group of shipping industry bonds with high asset coverage ratios.
Centre looks for opportunities to work with experienced partners to structure and provide capacity to CDOs and other asset-backed structured finance transactions through the application of non-traditional insurance and reinsurance products. In this case Centre took the lead, working closely with Tufton Oceanic, a London based private investment fund specializing in the shipping industry, to structure this transaction and provide capacity for $35 million of senior and subordinated debt. Tufton serves as asset manager for the transaction and arranged the equity financing.
"This deal, which is more focused than most CDOs, marries Tufton's specialized ability to identify and maximize the value of the underlying bonds with Centre's ability to provide financing that affords Tufton maximum flexibility to manage the portfolio," said Ron Redmond, who led Centre's effort in this transaction. "Centre's involvement is consistent with its role of providing capital to under-served or distressed markets that require a high degree of flexibility and customization from financiers."
Centre, a member of Zurich Financial Services, is a full-service provider of customized insurance, reinsurance, structured finance, and risk management programs
. Centre has offices in Bermuda, Dublin, Hong Kong, London, New Jersey, New York, Paris, San Francisco, Sydney and Zurich. Centre reported US$1.1 billion of capital and surplus, and $7.6 billion of total assets as of year-end 2000, with total revenues of $882 million in the year ended December 31, 2000. The financial strength of the Centre group of companies is rated "AA" or "Very Strong" by Standard & Poor's, "Aa3" or "Excellent" by Moody's Investors Services and "A" or "Excellent" by A.M. Best Company. Standard & Poor's has also assigned to Centre a financial enhancement rating of "AA". Standard & Poor's placed Centre's financial strength and financial enhancement ratings on
CreditWatch with negative implications as a result of a similar action taken with respect to the financial strength ratings of its ultimate parent, Zurich Insurance Company, following the World Trade Center terrorist attacks. S&P placed a total of 18 insurance groups on CreditWatch negative. These actions are expected to be resolved within a three-month period. The ratings assigned to Centre by Moody's and A.M. Best are unchanged and are currently not subject to any review.
The Zurich Financial Services Group (www.zurich.com) is a global leader of integrated financial services providing its customers solutions in the area of financial protection (non-life insurance and structured solutions) and asset gathering (life insurance and asset management). The Group focuses its activities on key markets, i.e. North America, UK, Switzerland, Europe and selected other markets where it has or can reach a competitive position. Founded in 1872, Zurich is headquartered in Zurich, Switzerland. It has offices in more than 60 countries employing approximately 70,000 people. In 2000, the Group achieved gross premiums of USD 50 billion. This amount includes insurance deposits as well as premiums from the Farmers P&C Group. The net income
was USD 2.33 billion. On December 31, 2000, the Group had USD 440 billion of assets under management of which USD 259 billion represent funds managed for third-party institutional and retail customers.