Q & A
Q.WHY HAS BARCLAYS SPUN OFF THESE ASSETS?
A.According to Barclays finance director Chris Lucas, the sale will reduce the bank’s exposure to potential deterioration of the assets and give it access to “stable risk-adjusted returns for shareholders over time”.
Q.DOES THE SALE REDUCE THE BANK’S RISK PROFILE?
A.Not really. Although the bank will be less exposed to writedowns from having to mark the assets to market, it still risks impairment on the $12.6bn loan it makes to Protium, should the fund fail.
Q.HOW DOES BARCLAYS BENEFIT?
A.While the bank will not really rid itself of risk relating to the assets, it will no longer live in fear of the failure of its monoline insurers, which would have triggered write-offs on some of its assets. Its exposure is now to the success of the new fund, rather than to highly volatile mark-to-market credit valuations.
Q.WHY IS THE LOAN GREATER THAN THE ASSET VALUE?
A.The extra $300m provided by Barclays, coupled with a $450m injection from Protium’s partners, will give the fund working capital to help it get off the ground.
Q.WHO WILL MANAGE PROTIUM?
A.Fund management company C12 Capital Management, run by former Barclays Capital employees Stephen King and Michael Keely.