Barclays Bank has structured its first synthetic collateralized loan obligation to hedge a portfolio of loans it holds on balance sheet. The European retail banking sister to Barclays Capital will transfer the risk of a GBP5 billion (USD 8.6 billion) pool of U.K small and medium enterprise loans--including retail stores, banking and healthcare--to a Dutch bankruptcy remote vehicle. The vehicle will then issue a series of notes denominated in sterling, euros and U.S. dollars. Called Gracechurch Corporate Loan Series, the CLO matures in 25 years.
The CLO is also imbedded with a series of cross-currency swaps to protect non-sterling note holders from foreign exchange and interest rate risk. Barclays will act as swap counterparty, paying floating sterling and receiving fixed euro or U.S. dollar from the issuer of the notes. Motivation, target investors, pricing and closing date of the CLO could not be determined.Emma Keens, spokeswoman for Barclays Bank in London, did not return calls by press time. Moody's Investors Service assigned the notes preliminary ratings Aaa to B2.
