Barclays to rescue Cairn Cap’s $1.6 bn debt fund
Barclays, the UK’s third-biggest bank, will help rescue a $1.6 billion debt fund run by London-based asset manager Cairn Capital after it was unable to raise money in the credit markets.
By Agencies |
LONDON: Barclays, the UK’s third-biggest bank, will help rescue a $1.6 billion debt fund run by London-based asset manager Cairn Capital after it was unable to raise money in the credit markets. Barclays’s securities unit will provide a loan to refinance the fund’s asset-backed commercial paper as it falls due, the London-based bank said Friday in a statement. The fund owns US securities mostly backed by home loans.
“What we’ve got is financing for the portfolio of assets through to final maturity, which is important because it means we don’t have to sell assets in the market,” said David Littlewood, a director at Cairn in London. “What has triggered the restructuring is the illiquidity of the ABCP market. The assets in the portfolio are of good quality.”
Companies that depend on commercial paper, debt due in 270 days or less are facing funding shortages as investors refuse to buy debt se-cured by assets including US subprime mortgages. HBOS, the UK’s largest mortgage lender, was forced on August 21 to commit to refinancing about $35 billion of asset-backed commercial paper sold by its Grampian Funding unit after yields on the short-term debt soared to the highest since 2001.
The fund, Cairn High Grade Funding I, is a so-called structured in-vestment vehicle that raised money in the commercial-paper market and invested the proceeds in longer-dated asset-backed debt. Barclays said it has hedged the risk from the financing.
Barclays shares rose 9 pence, or 1.5%, to 606.5 pence at 12:27 pm in London, leaving declines this year at 17%.
The bank borrowed as much as £1.6 billion ($3.2 billion) from the Bank of England after a failure in the system that processes trades, ac-cording to a person with knowledge of the transaction.
Barclays Capital’ head of European collateralised debt obligations, Ed Cahill, left the bank last week. Cahill, who had joined the bank in 2004, resigned, according to two people with direct knowledge of the matter.
Paul Campbell, who had previously worked at a unit of American In-ternational Group and at JPMorgan Chase, set up Cairn Capital in 2004 with backing from Royal Bank of Scotland Group and Star Capi-tal Partners. Cairn hired Littlewood and David Henriques, who had been co-heads of strutured credit products at Royal Bank of Scotland.
Campbell also hired Tim Frost, former head of European credit sales and trading, and credit trader Duncan Needham from JPMorgan.
“What we’ve got is financing for the portfolio of assets through to final maturity, which is important because it means we don’t have to sell assets in the market,” said David Littlewood, a director at Cairn in London. “What has triggered the restructuring is the illiquidity of the ABCP market. The assets in the portfolio are of good quality.”
Companies that depend on commercial paper, debt due in 270 days or less are facing funding shortages as investors refuse to buy debt se-cured by assets including US subprime mortgages. HBOS, the UK’s largest mortgage lender, was forced on August 21 to commit to refinancing about $35 billion of asset-backed commercial paper sold by its Grampian Funding unit after yields on the short-term debt soared to the highest since 2001.
The fund, Cairn High Grade Funding I, is a so-called structured in-vestment vehicle that raised money in the commercial-paper market and invested the proceeds in longer-dated asset-backed debt. Barclays said it has hedged the risk from the financing.
Barclays shares rose 9 pence, or 1.5%, to 606.5 pence at 12:27 pm in London, leaving declines this year at 17%.
The bank borrowed as much as £1.6 billion ($3.2 billion) from the Bank of England after a failure in the system that processes trades, ac-cording to a person with knowledge of the transaction.
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Barclays, which helped set up Cairn High Grade Funding I, and Dan-ske Bank A/S had committed to providing $442 million of emergency financing to the fund, according to a May report by Moody’ Investors Service. Barclays Capital’ head of European collateralised debt obligations, Ed Cahill, left the bank last week. Cahill, who had joined the bank in 2004, resigned, according to two people with direct knowledge of the matter.
Paul Campbell, who had previously worked at a unit of American In-ternational Group and at JPMorgan Chase, set up Cairn Capital in 2004 with backing from Royal Bank of Scotland Group and Star Capi-tal Partners. Cairn hired Littlewood and David Henriques, who had been co-heads of strutured credit products at Royal Bank of Scotland.
Campbell also hired Tim Frost, former head of European credit sales and trading, and credit trader Duncan Needham from JPMorgan.
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