Moody's lowers Converium Holdings

Moody's Investors Service said it placed the insurance financial strength ratings of Converium AG and Converium Rueckversicherung (Deutschland) AG on review for possible downgrade.

Commenting on its decision, Moody's said that its news release dated Aug. 31 made clear that the Baa1 IFSRs of Converium AG and Converium Rueckversicherung (Deutschland) AG were predicated on Converium raising $420 million of new equity. In light of Converium's recent announcements, it has become increasingly unlikely, in Moody's opinion, that the full amount will be raised.

Moody's also announced that it downgraded the $200 million 7.125% unsubordinated senior notes due October 2023 of Converium Holdings (North America) Inc. to B2 from Ba1.

The rating agency elaborated that Converium AG in its news release dated Sept. 10 had said the company revised its plans to increase the capital of Converium Insurance (North America) Inc. and decided to place this entity into run-off. In Moody's view, this decision substantially jeopardizes the position of debt holders of Converium Holdings (North America) Inc. and materially increases the risk of default. Moody's noted that the debt is likely to be downgraded further if Converium AG was placed into run-off or failed to demonstrate its commitment to service this debt.

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