Barclays moving cool USD 12.6 bn toxic assets into SIV

Discussion in 'Wall St. News' started by ASusilovic, Sep 16, 2009.

  1. Barclays on Wednesday unveiled plans to shift a cool $12.3bn of credit assets insured by monolines, RMBS and other asset backed securities into a new arms-length vehicle - a SIV, if you like - called Protium.

    Protium will be run by two senior Barclays credit specialists, Stephen King and Michael Keeley, who will leave the bank. The vehicle will initially be capitalised at $450m by its partners, and Barclays will then provide it with a $12.6bn 10 year loan.

    The partners get fixed payments of 7 per cent per annum on the $450m for 10 years. But, assuming they wind the credit assets down and repay the Barclays loan, they then get to keep any remaining excess cash.

    Off-balance sheet financing you say? Hold it right there.

    From the Barclays release:

    The Assets will remain on balance sheet for regulatory purposes; consequently the Transaction will not reduce the regulatory capital required for these Assets and may lead to an increase.

    The Assets will be sold at current fair values and therefore Barclays expects it will record neither a gain nor a loss on completion of the sale. Barclays will not consolidate Protium for accounting purposes and will derecognise the assets.

    So, borrowing the language of diplomacy to fight its good financial war, Barclays is managing its way out of its monoline mess.

    Except it isn’t, because as far as the authorities are concerned it will still be exposed to the suspect assets.

    So what’s the trick here? What is Smog Bank up to?

    A guess (H/T HT): accounting arbitrage.

    Barclays is turning assets that need to be marked (painfully) to market into assets that can now be treated as being held to maturity.


    It’s so refreshing that the banking industry cleaned up its act after the great Credit Crunch of 2007/8.

    (For what it’s worth, as far as the International Accounting Standards Board is concerned, derecognition is when an entity removes a financial instrument from its financial statements. This occurs if the entity no longer controls a financial asset or no longer has an obligation to settle a financial liability.)

    Hahahahahahahahahahahahaha....SIV. 12.6 bn financed with 450 million ? LOL !!!
  2. ipatent