Thursday, Sep 17, 2009
Barclays' Protium Finance
The Telegraph: Flashman: "Barclays and Protium. They are separate companies."
“Ostensibly the deal could look like the accounting alchemy of the bad old days. But the assets are still on the balance sheet, and are still liable to Barclays – they’ve just freed up some cash for growth. It’s less sinister that it seems.”
In a deal that initially caused alarm, Barclays announced it had sold the assets to Protium, which is registered in the Cayman Islands. It will be run by the same Barclays bankers who managed the assets prior to the deal.
Posted by devo @ 11:43 PM (745 views) Add Comment
15 Comments
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1. paul said...
Sounds to me like Enron Mk II in the making.
2. devo said...
I've flagged up this story over the last couple of days as a nice little example of why there won't be a house price crash.
3. Bellwether said...
This is causing people a problem because Barclays by making what looks like a risky loan (a loan on risky assets) to Protium are able to say they have an additional 12bn or whatever in assets.
The situation would be different if Protium had self funded or borrowed from elsewhere but it is all from Barclays. Barlcays risk profile is not lessened at all (although it has I suppose shed 45 staff) but it is acting as if risk reduced and assets increased and is calling the former trash a loan asset and by the sounds of it blowing the 12 bn in speculation
Sounds unstable to me
4. inbreda said...
"they’ve just freed up some cash for growth"
Really? I thought they funded the entire purchase themselves - thus leaving them with zero additional cash, zero reduced liabilities, but wait! hang on! it's been offshored to a tax haven - so they are making money by stealing it from the british tax payer!
makes sense
5. cynicalsoothsayer said...
It's nothing more than Barclays changing the label on their "assets". Doesn't change the likelihood of a hpc. Banks are willing to sit on empty repossessions while interest rates are low, but it'll be different when they rise back to normal rates. Low mortgage interest rates come to the same thing as a non-performing loan.
6. bellwether said...
Maybe its because I'm looking for a Friday morning ding dong but fundementally disagree with Flash on this one.
I would agree if Protium had self funded or bought with 3rd party loan funds but they borrowed from Barclays and have to my knowledge no assets other than that which they bought from Barclays ie they are nothing more than this deal, hence perhaps the tell comment that they are keen to do such deals with other banks - and that's a tell even if its true.
Specifically Barclays risk profile is not lower (unless you count the cost of losing 40 staff) but critically they are acting as if its lower by treating the loan as an asset and speculating off the back of it. This increases there stabilty.
his is unstable and it's incestous and we know how mad inbreeding can become.
7. bellwether said...
fck what a t*t, decreases their stabilty was what I meant to say.
8. alan_540 said...
Bit early to be drinking isn't it bellwether?
9. bellwether said...
Alan, as Flash will tell you I'm a depressed drunk (like Keith Chegwin/Floyd or Richards (sans glamour) and we lot hit the bottle early and late.
Also managed to post a message that passes resemblance to 6, without admin code, so that will unhelpfully pop up at some point this morning. Now off to spam the just posted money week link to protium.
10. alan_540 said...
apologies bellwether, my comment was meant in jest.
11. bellwether said...
no worries Alan me also
12. refusetobuy said...
This is the key
"Protium has been backed by a $450m investment from its partners, thought to be two hedge funds which have not yet been identified. The partners will receive 7pc a year on their investment as well as any excess returns from the assets’ performance."
So Barclays either get a fixed return on their loan, or they lose money. The amount of money they can lose has been reduced by $450m. In return, they've sold all the upside risk.
13. alan_540 said...
touche
14. Leftknight4 said...
Except that if you read the deal details, the 450 million gets repaid before Barclays loan - the loan is subordinated to the "equity".
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