Moody's rates Cyrus Re loan Ba1

Moody's Investors Service said it assigned a Ba1 rating to Cyrus Reinsurance Ltd.'s $100 million secured term loan facility due 2010.

The outlook is stable.

The agency said the rating on the term loan is supported by Cyrus Re's level of capitalization relative to its catastrophe exposure, which has been enhanced by retained earnings from a benign catastrophe season and favorable pricing levels. Lenders and noteholders also benefit from certain structural characteristics - particularly as they relate to limitations on dividend payouts and return of equity capital - that serve to better align the interests of equity and debt investors.

Moody's said these positive considerations are offset by several factors: up to half of the proceeds from the loan offering will be immediately distributed to holding company Cyrus Reinsurance Holdings SPC's shareholders, the term loan provides significant support to - and is subordinated to - the $220 million senior notes held at Cyrus Reinsurance Holdings and interest payments on the term loan are constrained by a coverage test that aims to ensure that funds are earmarked to pay interest and principal on the senior notes before payments can be made on the term loan.

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