Swiss ReSwiss Re Financial Products ISDA Luncheon November 9, 2001 (i) The Impact of September 11 on the Credit Markets (ii) Recent Changes to the Credit Derivatives Documentation

Swiss ReSwiss Re Financial Products 2 Particularly Volatile Industry Sectors Airlines Leisure/Travel Lodging Retail Automobile Insurance Investment Banking

Swiss ReSwiss Re Financial Products 3 Reaction to September 11 Events Credit spread widening Widening of bid/offer spreads Notional per trade dropped Discontinuous moves in default premiums Counterparty credit exposure closely monitored –Increased correlation concerns Reduced appetite for non-standard structures

Swiss ReSwiss Re Financial Products 4 Reasons for Credit Spread Widening Weakening economy September 11 attacks Rating agency activity New issue flow Softened by –Rate cuts –Relatively stable equity markets

Swiss ReSwiss Re Financial Products 5 Airlines: British Airways Plc

Swiss ReSwiss Re Financial Products 6 Rating action: Moody’s: –Sep 17: Negative watch (A3) –Oct 12: Cut to Baa3, negative outlook S&P: –Sep 13: Negative watch (BBB+) –Oct 16: Cut to BBB-, negative watch Airlines: British Airways Plc (cont.) Baa3 (negative) / BBB- (watch -)

Swiss ReSwiss Re Financial Products 7 Lodging: Hilton Hotels Corp.

Swiss ReSwiss Re Financial Products 8 Lodging: Hilton Hotels Corp. (cont.) Baa3 (watch -) / BBB- (watch -) Rating action: Moody’s: –Sep 25: Negative watch (Baa3) S&P: –Sep 21: Negative watch (BBB-)

Swiss ReSwiss Re Financial Products 9 Retail: The Gap, Inc.

Swiss ReSwiss Re Financial Products 10 Retail: The Gap, Inc. (cont.) Baa2 (negative) / BBB+ (stable) Rating action: Moody’s: –Oct 12: Negative watch (A3) –Oct 29: Cut to Baa2, negative outlook S&P: –Oct 29: Cut 2 notches to BBB+, stable

Swiss ReSwiss Re Financial Products 11 Autos: Ford Motor Credit Company

Swiss ReSwiss Re Financial Products 12 Autos: Ford Motor Credit Company (cont.) A2 (negative) / BBB+ (stable) Rating action: Moody’s: –Aug 17: Negative watch (A2) –Oct 18: Removed from negative watch; Ford Motor Company cut to A3 and P-2 (short-term) S&P: –Aug 17: Negative watch (A) –Oct 15: Cut to BBB+, A-2 (short-term)

Swiss ReSwiss Re Financial Products 13 Autos: Ford Motor Credit Company (cont.) Debt offerings : Oct 25: Ford sells $9.4 billion global debt –2y + 3y floaters, 5y, 10y + 30y bonds Oct 26: GMAC sells $6 billion 10y + 30y bonds Increased utilization of alternative financing –Asset-backed market

Swiss ReSwiss Re Financial Products 14 Insurance: AXA S.A.

Swiss ReSwiss Re Financial Products 15 Insurance: AXA S.A. (cont.) A1 / A+ (stable) Rating action: None

Swiss ReSwiss Re Financial Products 16 Brokers: Lehman Brothers Holdings Inc.

Swiss ReSwiss Re Financial Products 17 Brokers: Lehman Brothers Holdings Inc. (cont.) A2 (stable) / A (stable) Rating action: None

Swiss ReSwiss Re Financial Products 18 Telecom: AT&T Corporation

Swiss ReSwiss Re Financial Products 19 Telecom: AT&T Corporation (cont.) A3 (watch -) / A- (watch -) Rating action: Moody’s: –Oct 25: Cut to A3, negative watch S&P: –Oct 29: Cut to A-, negative watch –Nov 9: $5 billion issue rated BBB+ –Expected to belong to AT&T Communications Services, Inc.

Swiss ReSwiss Re Financial Products 20 Photo Equipment: Eastman Kodak Company

Swiss ReSwiss Re Financial Products 21 Photo Equipment: Eastman Kodak Company (cont.) A3 (watch -) / A- (stable) Rating action: Moody’s: –Oct 30: Cut to A3, negative watch S&P: –July 23: Negative watch (A+) –Oct 25: Cut 2 notches to A-, stable outlook

Swiss ReSwiss Re Financial Products 22 (ii) Changes to the Credit Derivatives Documentation Zero Coupon Bonds and Convertible Bonds as Deliverable Obligations Bankruptcy Credit Event Currency of Payment Publicly Available Information Successor

Swiss ReSwiss Re Financial Products 23 Changes to the Credit Derivatives Documentation (cont.) Clarification about Guaranteed Obligations Recommendations about –Obligation Default / Obligation Acceleration –Repudiation / Moratorium

Swiss ReSwiss Re Financial Products 24 Zero Coupon Bonds and Convertible Bonds as Deliverable Obligations Section 2.18(b)(vii), Not Contingent... any obligation –(A) the payment or repayment of principal of which is not in an amount determined by reference to any formula or index, or which is not subject to any contingency –(B) which bears interest at either a fixed or floating rate that is paid on a periodic basis and...

Swiss ReSwiss Re Financial Products 25 Zero Coupon Bonds and Convertible Bonds as Deliverable Obligations (cont.) Section 2.18(b)(vii), Not Contingent, rules out Zero bonds But does not exclude non-zero convertible bonds –if they are convertible at the option –of the bond holder –of their trustee acting for their benefits

Swiss ReSwiss Re Financial Products 26 Zero Coupon Bonds and Convertible Bonds as Deliverable Obligations (cont.) Amend Section 2.18(b)(vii) Accreting language –Accreted Amount –Original issue price plus –Balance between issue price and payment at maturity

Swiss ReSwiss Re Financial Products 27 Bankruptcy Credit Event Amend Section 4.2(b) –... fails or admits in writing in a judicial, regulatory or administrative proceeding or filing its inability generally to pay its debts as they become due; Addresses concerns that any broad statement about financial difficulties may trigger a default swap

Swiss ReSwiss Re Financial Products 28 Bankruptcy Credit Event (cont.) Amend Section 4.2(i) Delete –or (i) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts

Swiss ReSwiss Re Financial Products 29 Currency of Payment Section 4.7, Restructuring Replace 4.7(a)(v) –Restructuring means... (v) any change in the currency or composition of any payment of interest or principal Permitted Currency –G7 countries –OECD countries that are rated AAA by at least one of Moody’s, S&P and Fitch

Swiss ReSwiss Re Financial Products 30 Publicly Available Information Section 3.5 Information contained in any –judicial, administrative or regulatory filing or proceeding should constitute Publicly Available Information Filings with the SEC Present language may not allow usage of filings unless reported in public source

Swiss ReSwiss Re Financial Products 31 Successor Definition Section 2.2 Successor (current version) –... a direct or indirect successor to a Reference Entity that assumes all or substantially all of the obligations thereof by way of merger, consolidation,... Existing default swap will be split up in case of several successors –Based on thresholds 75% and 25% –> 75%: 1 successor –25% <= X < 75%: Split up trade in pieces of equal size –< 25%: Original entity or new “largest” entity

Swiss ReSwiss Re Financial Products 32 Contact Hilmar Schaumann Tel Swiss Re Financial Products Corporation 55 East 52nd Street, 41st Floor New York, NY 10055