Special Report
Salomon Swapco Inc.
Rating
Counterparty Risk ............................... AAA
Analysts
Roger W. Merritt, CPA
(212) 908-0636
Peter G. Jordan
(212) 908-0566
Company Contact
Douglas J. Lucas
Co-Chief Executive Officer
(212) 783-0607
Summary
Fitch affirms Salomon Swapco Inc.'s (Swapco)
'AAA' counterparty risk rating. Swapco is a
wholly owned subsidiary of Salomon Broth-
ers Holding Co. (SBHC), which, in turn, is
wholly owned by Salomon Inc. Swapco is a
bankruptcy-remote, stand-alone derivative
product company (DPC) established to inter-
mediate certain derivative transactions be-
tween highly rated counterparties and SBHC.
The counterparty risk rating is based on a
strong capital base and high counterparty
credit quality; conservative risk management,
investment, and operating guidelines; and a
termination structure that requires cash set-
tlement of all Swapco contracts following a
trigger event.
Swapco intermediates various over-the-
counter (OTC) derivative transactions, includ-
ing swaps and options on interest rates,
currencies, and equities with highly rated coun-
terparties. As of Sept. 30, 1995, the notional
amount of Swapco's total portfolio was
$100.4 billion, an increase from $66.8 billion
at year-end 1994. Based on notional amounts,
the majority of transactions involve swaps or
options on various interest rate indexes. At
Sept. 30, the average maturity of Swapco's
derivative portfolio was 4.3 years.
Swapco determines capital requirements
daily on the basis of portfolio size, counter-
party credit quality, and portfolio diversifica-
December 25, 1995
Fitch
Research
Financial Institutions
