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 [分享]Fairfax May Benefit From AIG Credit-Default Swaps |
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naboo
头衔: 海归少校
声望: 学员
性别:  年龄: 52
加入时间: 2004/02/22
文章: 145
来自: 天津/Tianjin
海归分: 15567
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作者：naboo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
https://www.bloomberg.com/apps/news?pid=20601082&sid=aCUxiQhK4NrU&refer=canada
my current holding: 70% in FFH, 30% in cash. I think currently FFH is worth at least $400.
Fairfax May Benefit From AIG Credit-Default Swaps (Update1)
By Sean B. Pasternak and Doug Alexander
Sept. 17 (Bloomberg) -- Fairfax Financial Holdings Ltd., the Canadian insurer whose shares rose 8 percent this week, may be on the verge of a ``major payday'' after betting against American International Group Inc., an analyst said.
Fairfax may hold about $1 billion in credit-default swaps that rise in value when AIG's credit outlook worsens, Cormark Securities analyst Jeff Fenwick said today in a note. Fairfax's Chief Legal Officer Paul Rivett declined to comment on how much the insurer invested in swaps linked to AIG, which was taken over by the U.S. government last night.
``Fairfax is likely to make some money out of this,'' Fenwick said in an interview. ``They may have taken some money off of the table, and they continue to hold other positions out there such as Washington Mutual.''
Fairfax has been betting against financial firms since 2003, when Chief Executive Officer Prem Watsa began investing in credit-default swaps. These are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt or to hedge against losses. The value of the contracts increases when investor sentiment deteriorates and the cost of protection rises.
``We were quite early to the game,'' Rivett said late yesterday in an interview. ``As value investors, we're always making sure to protect the downside first before any upside.''
Cash Gains
The strategy has paid off for Fairfax, which owns Canadian and U.S. insurers. The company said in July it has sold $6.53 billion notional amount of credit default swaps that were originally purchased for $158.1 million, for cash proceeds of $1.4 billion.
While AIG and other financial stocks plunged this week, Fairfax gained two of the last three sessions. The stock fell C$2.25 to C$247.75 at 12:29 p.m. trading on the Toronto Stock Exchange. AIG plunged 41 percent to $2.22 in New York, and has fallen 96 percent this year. The insurer received an $85 billion bailout from the government last night to avert collapse.
``Fairfax was early to detect the emerging problems in the U.S. subprime market and positioned its portfolio to benefit from a downturn,'' Fenwick said in his note. ``Fairfax's credit- default swap portfolio appears ready to generate significant investment gains for the company.''
He estimates Fairfax may post gains of $750 million to $1.25 billion in the third quarter.
Rivett declined to estimate gains that may come from the AIG investment because swaps ``always go up and down in value, and you can't realize gains until you dispose of them.''
Rivett said Fairfax doesn't have ``much'' in swaps tied to Lehman Brothers Inc., the securities firm that filed for bankruptcy this week. He declined to say whether Fairfax plans to bid on any AIG assets that may be sold, and couldn't be reached today for comment on the AIG bailout.
To contact the reporter on this story: Sean B. Pasternak in Toronto at [email protected].
作者：naboo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 [分享]Fairfax May Benefit From AIG Credit-Default Swaps -- naboo - (3347 Byte) 2008-9-18 周四, 01:42 (2011 reads)
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