Barclays offloaded troubled loans

Barclays, the UK banking group, has offloaded troubled loans worth more than £6bn ($11.7bn) in the past few months in a further sign that investors are increasingly willing to buy debt securities hit by the credit crunch.

Barclays executives yesterday said they had sold leveraged loans, mortgage-backed securities and mortgages with a value of £6.3bn in the first half of the year as part of an effort to scale back the bank's exposure to troubled debt securities. Most of the sales, which were agreed in May and June, were at prices consistent with valuations on Barclays' balance sheet, and did not require the bank to provide financing to buyers.

The disposals are further evidence that banks are increasingly able to shift debt securities.

"Risk transfer has begun," Bob Diamond, Barclays' president, said yesterday. "Even difficult assets - even mortgage assets - are moving to new buyers."

Last month Merrill Lynch sold collateralised debt obligations with a nominal value of more than $30bn to Lone Star, the US private equity group, at about 22 per cent of face value.

In May UBS, the Swiss bank, sold mortgage securities with a face value of $22bn to BlackRock, the asset management group. In both cases the banks helped to finance the purchase. Barclays revealed the sales as the bank reported that it had written down the value of complex debt securities on its balance sheet by £2.8bn in the first half of the year.

The writedown, which was partly offset by an £852m gain from revaluing the bank's own debt, was largely responsible for the drop in the bank's pre-tax profits, which fell 33 per cent to £2.75bn.

Barclays has in recent months faced persistent questions about the valuation of debt securities on its balance sheet. The sales included the financing of about £2.3bn of loans backing the private equity buy-out of Alltel, the US telecom group. Alltel has since been sold to Verizon, its US rival, which redeemed the debts.

Barclays has also sold whole subprime mortgage loans worth £828m, Alt-A mortgages worth £750m and commercial mortgages worth £700m.

John Varley, Barclays' chief executive, said he was disappointed by the results and the drop in the bank's shares which, in spite of a recent rally, have lost almost half their value in the past 12 months. "We will be working as hard as we can to ensure a higher valuation can be placed on our shares," he said.

Barclays shares closed at 375p, up 6p, as the bank indicated it was likely to maintain its cash dividend payment for the full year.

Excluding the impact of the writedowns Barclays' investment banking arm, Barclays Capital, reported flat income as booming trading in foreign exchange, interest rate products and commodities made up for the slump in fixed income business.

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Barclays offloaded troubled loans

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