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XL Capital CDS trades upfront, stock plunges

Thu Oct 9, 2008 11:48am EDT

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NEW YORK, Oct 9 (Reuters) - Credit default swaps on XL Capital Ltd (XL.N) began trading on an upfront basis on Thursday, and its stock price plunged more than 37 percent.

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The cost to insure XL's debt rose to around 12.5 percent the sum insured as an upfront sum, or $1.25 million to insure $10 million in debt for five years, in addition to annual premiums of 5 percent, according to Phoenix Partners Group.

Swaps trade on an upfront basis when a company is considered distressed.

The swaps had opened at a spread of around 750 basis points, or $750,00 per year for five years to insure $10 million in debt, according to Phoenix. (Reporting by Karen Brettell; Editing by James Dalgleish)

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