Is it wrong that a security can be classified as 75% equity by a borrower and yet is considered debt by insurance investors? That is the question that arises from the ruling of the National Association of Insurance Commissioners (NAIC) in the US that Lehman Brothers’ ECAP structure is equity.
When it appeared in August 2005 the ECAP was seen as a landmark deal as it was the first US hybrid to meet Moody’s basket D category [see Euromoney’s FIG Innovation of the Year, February 2006]. A year ago, Moody’s methodology...
