S&P Puts Eurus Notes on CreditWatch/Negative after Windstorm

February 9, 2007

Standard & Poor’s Ratings Services has placed a CreditWatch with negative implications on its “BB” rating on the $150 million principal at-risk variable-rate notes issued by Eurus Ltd.

“The CreditWatch placement follows Windstorm Kyrill hitting Europe on Jan. 17 and 18, 2007,” S&P said. “The notes issued by Eurus are linked to European windstorm events. Hannover R├╝ckversicherung AG [Hannover Re], as counterparty to an ISDA-documented contract with Eurus, has notified Eurus that it wants to determine if Kyrill is a covered event.”

S&P also indicated that “EQECAT, Inc., the calculation agent for the transaction, will now perform an event calculation as per the offering circular of the notes and report its results by April 12, 2007, at the latest.

“Following the release of EQECAT’s findings, Standard & Poor’s expects to resolve the CreditWatch status of the rating. If EQECAT reports that the windstorm index value associated with Kyrill is at least 623.43, the notes will be subject to principal reduction and the rating will be lowered to ‘D’. If the windstorm index value is less than 623.43, the rating on the notes will be removed from CreditWatch and affirmed.”

S&P said that “based on discussions with parties related to the transaction it expects that the windstorm index value will not exceed 623.43 and that the rating will be affirmed, although the possibility exists that noteholders could lose principal.”

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