Dateline: 19/11/1999
SCHAUMBURG, IL, November 19, 1999 – Zurich U.S. Political Risk, a leading global provider of political risk insurance, today announced that it has issued its first political risk policy for a capital markets transaction in Mexico. Designed to protect bonds in emerging markets, coverage for currency inconvertibility and transfer risk was used to enhance a $150 million private-placement bond issue by Mexican brewer Femsa Cerveza, S.A. de C.V. The Zurich U.S. political risk policy is also the first of its kind issued by a private insurer.
“Lenders were burned in the economic crisis that swept Asia, Russia and Latin America. Since then the cost of borrowing has risen significantly for some companies in these markets. Zurich’s innovative political risk policy for capital markets will help bond issuers in emerging markets gain access to private capital at a price they can afford,” said Daniel Riordan, Vice President and Managing Director at Zurich U.S. Political Risk.
Political risk insurance is a critically important component of these transactions because it can increase the rating of these bonds from ‘below investment grade’ to ‘investment grade.’ The Femsa Cerveza transaction secured a rating of A- from Fitch IBCA, well above Mexico’s BB+ sovereign rating. “The Femsa Cerveza transaction was an all-around solid deal,” said Mia Koo, associate director of International Structured Finance at Fitch IBCA. “The company has strong credit fundamentals, including minimal leverage and a competitive market position. Sovereign risk is mitigated with a thorough political risk insurance policy and the structure ensures timely debt service to investors. Fitch IBCA is pleased to have rated this innovative transaction.”
Warburg Dillon Read arranged the transaction. Structuring support came from Signet Participations, in association with Houston-based insurance broker, Randy Crawford, of Bowen Miclette & Britt. Zurich worked closely with Warburg Dillon Read and the other parties in structuring a policy that addressed the specific requirements of Femsa Cerveza’s bond offering.
Zurich U.S. Political Risk can provide up to $100 million in coverage per transaction and can match the tenor of the insured bond, up to a term of 15 years. Zurich’s capital markets policy includes fixed periods for compensation to ensure timely payments, and coverage triggers that do not require a default on securities.
Zurich U.S. Political Risk is part of Zurich U.S., a leading commercial property and casualty insurance company serving the multinational, middle market and small business sectors in the U.S. The company has established itself as a leading underwriter in the political risk market and has underwritten policies covering risks in 55 emerging market countries. Zurich U.S. is a member of the Zurich Financial Services Group, a global leader in the financial services industry.
Providing its customers with solutions in the area of financial protection and asset accumulation, the Zurich Financial Services Group concentrates its activities in four core businesses: non-life and life insurance, reinsurance and asset management. Headquartered in Zurich, Switzerland, the Group’s worldwide presence builds on strong positions in its three home markets – the United States, the United Kingdom and Switzerland. It has offices in more than 60 countries reaching over 33 million customers and employing 68,000 staff members.
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Media contacts: Tina Angelone
Marketing Communications Manager
Zurich U.S., Specialties Business Unit
tel: (212) 676-4385
tina.angelone@zurichna.com
Joanne Lessner
Miller DeMartine Group
tel: (212) 222-7436
jlessner@mdgpr.com
