Sunday, December 4, 2011

Something Else About Barclays

From a London Telegraph article:

in September 2009, Barclays announced the sale of $12.3bn (£7.7bn) of toxic assets to an off-balance sheet vehicle called Protium. Protium is effectively a Barclays subsidiary. It is funded by a 10-year, $12.6bn Barclays loan and its management company, C12, is staffed by 45 ex-Barclays bankers who quit solely to do the deal.
Apparently, Barclays has since unwound this deal. Nonetheless, I can't believe that people lend money to enterprises that do stuff like this! I want to quietly figure out which other banks have done things like this, especially if the banks have noncumulative preferreds trading at single-digit yields.

Read this article by Christopher Whalen, who is a great analyst. 
Only by ignoring the sovereign and off-balance sheet footings of Deutsche and other major EU banks can anyone even for a moment pretend that these banks are solvent.
Under what set of circumstances could loans to these European banks, made at single digit interest rates, outperform the debt of oil/gas companies with debt that either yields more or has a conversion option? I just don't see it.

1 comment:

Eric said...

I just don't see it.

Yours is not to wonder why. Only to profit from what you see in the market. Stupid or not.