Standard & Poor’s have announced that they have dropped their rating of the Avalon Re Ltd. class C notes to CC from CCC-. Avalon Re is a 2005, 3 year insurance linked security from Oil Casualty Insurance Ltd, see our Deal Directory for more info.
The downgrade follows notification that a steam pipe explosion in New York City on July 18th 2007, would be covered under the terms of the agreement. “To date, Avalon Re Ltd. has experienced $297 million of covered losses due to Hurricane Katrina and the explosion at the Buncefield oil depot,” said Standard & Poor’s credit analyst Gary Martucci. “This leaves only $3 million of covered losses that can be incurred prior to any losses being borne by the Class C noteholders.” It’s said that losses could be up to $50m
Standard & Poor’s is not taking action on the Class A and B notes, as there are currently no claims in progress which could cause further losses to Avalon Re.
See Standard & Poor’s for more detail (registration required).