Barclays Capital announced that it will unwind its Protium vehicle, originally set up in 2009 to hold some of its riskiest U.S. structured credit assets and reduce losses linked to credit market volatility. These are currently valued at around $10 billion.
Protium is managed by New York-based C12 Capital Management. C12 is run by 45 traders who left the Barclays Capital in September 2009 to join the operation led Stephen King and Michael Keeley,
Barclays indicated that it will take back full ownership of the assets and wind down the portfolio over three years, according a report in the Associated Press. Barclays financed the purchase of the assets through a $12.64 million 10-year loan.
This move comes on the back of a similar action take by Citi recently, which readied the sale of about $13 billion in credit assets by shifting these back onto their trading books, Royal Bank of Scotland analysts said.
"Whether such strategies are embraced by the vast European ‘bad-bank’ constituency remains a key consideration for market technicals going forward, to be sure the approach of most ‘non-core’ entities hitherto has centered on the full term warehousing of assets," said analysts in a report. "In our view, any sales currently are likely to make most obvious sense only in the case of liquid, senior ABS but potentially also in the case of low or un-rated downgraded bonds, for which exit economics will not be limited to pricing alone given the benefit of saving on otherwise punitive capital that must be held against such risks under the new Basle regime."
The analysts said that these capital considerations for low and unrated bonds were cited as key in both the Barclays and Citi actions.