Slabbed finds Ajax’s Achilles Heel: Rock Mountain High or Just Stoned in Bermuda?

Special thanks to Chris Sposato. If memory serves there were a dirty (half) dozen “guaranteed” Cat Bond issues connected to Lehman. The second to come tumbling down belongs to Bermuda based Aspen Insurance Holdings, Ltd. and their special purpose entity Ajax Re Ltd. The associated ri$k to take a hit is covered earthquake damage in California. The story itself begs additional research as this deal sounds as if there might be Cat Bonds stuck inside Cat Bonds with a (subprime) Mortgage Backed Security twist. The list of players per the article is very convoluted as well.  The Royal Gazette has the Bloomberg story:

Ajax Re Ltd., a catastrophe bond sold by Bermuda-based Aspen Insurance Holdings Ltd., is likely to default on an interest payment this month, Standard & Poor’s said, the second such security hurt by Lehman Brothers Holdings Inc.’s collapse.

S&P said it may downgrade $100 million of debt issued through Ajax Re Ltd. to D, the lowest grade, from CC, citing an “imminent interest payment default”, according to a statement from the New York-based ratings company yesterday.

Aspen sold the bonds in 2007 to protect against claims from Californian earthquakes.

“The issuer has notified us that it will not have sufficient funds available in the collateral payment account to make the scheduled interest payment,” S&P said. “We anticipate the transaction will default.” Continue reading “Slabbed finds Ajax’s Achilles Heel: Rock Mountain High or Just Stoned in Bermuda?”