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Nimble Primus gets set for IPO

While many focused their attention on JPMorgan Chase's acquisition of the hedge fund Highbridge, another nimble operator was busily getting ready for its initial public offering. On September 30 Primus Guaranty raised $139.7 million.

Primus is an interesting animal. It's a special investment vehicle that started trading in 2002 and concentrates almost exclusively on selling protection using default swaps. It was the first credit derivatives operating company, according to Standard and Poor's, which along with Moody's has assigned Primus Financial, the firm's principal subsidiary, a triple-A rating. By June this year Primus had sold credit protection with a notional value of $8.7 billion.

"They're a triple-A diversified SIV," says one structured credit banker. "They sell protection on a diversified list of names, have rules on country and company ratings and limits."

"It's a virtual bank, and was the first one set up to do this," says a banker. At least $60 million of the proceeds of the IPO will be used to provide more capital to Primus Financial to be able to sell more default swaps. The rest will be used for general purposes.

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