James Cullen

On Primus Credit Mitigations

There's the possibility for a collateralized CDS seller, which could possibly be economic if spreads remain elevated, since it would operate with lower leverage than the CDPC. But if that's in the works, it's going to involve outside investors, since the stated operating plan is to run off PFP and return that capital. So there, you're relying not only on the ratings agencies to bless the endeavor, but whatever capital allocated to the structured credit markets that still exists to want to fund the venture.

Devoting time and resources to building out a collateralized entity would also detract from the mission of building out Primus' asset management capabilities. There's plenty of institutional skepticism about how successful those efforts will be, so I don't know if management wants to tackle a second growth avenue at this point.

You're right about the reduced competition finally making new business attractive (a theme applicable to a number of areas). I'd like to see them raise new capital and seed a collateralized DPC to extend the credit platform. But it'll take nine figures worth of fresh capital, so I don't know how realistic it is.


On Aug 03 02:30 PM Gtarras wrote:

> So, what is the future for Primus? do you believe they return to
> writing new business/generating revenue?
>
> if they do, how profitable do you think it will be? they will have
> to post CSAs, how much of capital will this be tying up? will they
> need a high rating?
>
> TIA. i'm actually interested in this stock and this platform. given
> the upcoming demand for risk management products, and wiped out competition
> (such as monolines, AIG etc), i 'm curious if there is bright future
> for Primus.

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