NEW YORK (Bloomberg) — Bermuda-based Primus Guaranty Ltd., which manages $24.2 billion in credit-default swaps, said it expects to make payments on $68.2 million in guarantees on Kaupthing Bank hf bonds after the Icelandic bank was seized by the government.

Primus will pay counterparties the difference between the $68.2 million and the current value on the bonds after the takeover triggered a technical default in credit-default swaps linked to Kaupthing's debt, Primus said in a statement today.

The bond values will be set by a dealer auction in the coming weeks. Trading in Primus shares was halted on the New York Stock Exchange after the stock dropped 53 percent to 99 cents.

The Iceland default is the latest blow to Primus, a company that lost its top Aaa counterparty rating last week from Moody's Investors Service after using credit-default swaps to make bets on Lehman Brothers Holdings Inc. and Washington Mutual Inc., both of which filed for bankruptcy last month. The company also must pay on contracts linked to Fannie Mae and Freddie Mac, which were seized by the US government, triggering a technical default.

Primus Financial Products LLC, the company's swaps unit, was cut one grade to Aa1 last week by Moody's. Standard & Poor's has said it may lower its top rating, and Moody's said it may cut further.

Primus has lost 86 percent of its market value this year amid losses related to guarantees the company made for mortgage- related securities that later fell in value.

The loss of its top rating wouldn't require Primus to post collateral on its trades, and counterparties couldn't demand payments on those contracts, the company said a statement last week. The company said it had $820 million in cash and liquid investments to meet claims on contracts.