Barclays plays down debt worries

BARCLAYS yesterday denied speculation that it has several hundred million dollars of exposure to struggling esoteric debt vehicles structured by its investment banking arm.

It followed a report that claimed the highly-leveraged structured investment vehicles - known as SIV-lites - had run into trouble due to the turmoil in global credit markets.

A spokesman for Barclays said: "To say we have hundreds of millions of dollars of exposure to SIV-lites generally is inaccurate."

Worries this week have focused on a SIV-lite structured by Barclays Capital for stricken German lender SachsenLB, which is being sold to rival LBBW.

The Barclays spokesman said yesterday that it had provided no funding so far for the vehicle, Sachsen Funding 1.

A source familiar with the structure said Sachsen Funding 1 includes a facility whereby Barclays can be tapped for cash if the vehicle runs into trouble - but there is a cut-off limit for help.

Royal Bank of Scotland credit analysts said in a note yesterday: "Typically Barclays is a liquidity provider to the SIV-lites it has structured and it appears that Barclays is able to withdraw its committed credit line should the [net asset value] of the SIV-lite fall by more than 10 per cent.

"[It] remains debatable whether Barclays would actually do this and regardless the exposure it retains is material."

Worries about SIV-lites come after a turbulent week which saw the resignation of BarCap's, Edward Cahill, whose team has been instrumental in developing SIV-lites.

Rating agency Standard & Poor's has only rated five SIV-lites, downgrading two steeply and putting two on negative rating watch - all four of the negative ratings having been arranged by BarCap.

Worries over Barclays' exposure to SIVs comes as the bank nears the end of the takeover battle for Dutch bank ABN AMRO - with its falling share price potentially fatal to efforts to secure the biggest banking takeover to date.

Barclays shares closed down 3.6 per cent at 589p.