The huge British bank Barclays PLC unveiled a novel plan today that in the short-term should allow it to minimize big swings in the value of not-so-stellar securities sitting on its books. It’s a plan that may very well be copied by other European banks.
Barclays is selling $12.3 billion of residential and commercial mortgage-related securities and a small amount of leveraged loans to a fund that was recently set up by two former Barclays employees. The fund will raise $450 million of equity through the sale of limited partnership interests and borrow $12.6 billion from Barlcays. The securities will act as collateral for the loan.