Barclays' hiring spree
Posted: Tue Jan 04, 2005 12:01 pm
In today's FT:
[b]City investors keen to view looming banking showdown[/b]
Of the many opaque corners of the financial markets, the world of structured finance is probably least often exposed to the light of day. Although the value of outstanding credit derivatives contracts is now estimated at more than $3,000bn (£1,575bn) worldwide, many of these receive little external scrutiny.
That is one of the reasons why many investors and traders are keeping a close eye on the bitter legal battle between Barclays Capital, the investment banking arm of the British bank, and HSH Nordbank, the state-owned German bank that was created last year through the merger of two smaller lenders. Unless the two sides can hammer out a settlement, they are due to argue their differences in a London court in early February.
[b]
…
[/b] The immediate subject of the February court case is LB Kiel's $151m investment in Corvus. HSH alleges that it was misled about the nature of the CDO, and that the entity was subsequently mismanaged, especially in the period after September 11 2001 when the credit markets took a beating. The case does not cover the other $420m that was invested by LB Hamburg in another Barclays CDO called Nerva, though HSH says it is reviewing legal proceedings.
According to people close to HSH, the Barclays team created a series of interlocking CDOs, some of which were never offered to external investors, which had the effect of exposing HSH to risky credits such as aircraft leases and loans for manufactured housing without the bank's knowledge. When the underlying securities began to deteriorate, they triggered a cascade of downgrades by Fitch, the rating agency. The collapse was so rapid that within less than three years Corvus notes that had been assigned an AAA rating in December 2000 had been reduced to "junk" status.
Full article: http://news.ft.com/cms/s/20cf424e-5df6-11d9-ac01-00000e2511c8.html
[b]City investors keen to view looming banking showdown[/b]
Of the many opaque corners of the financial markets, the world of structured finance is probably least often exposed to the light of day. Although the value of outstanding credit derivatives contracts is now estimated at more than $3,000bn (£1,575bn) worldwide, many of these receive little external scrutiny.
That is one of the reasons why many investors and traders are keeping a close eye on the bitter legal battle between Barclays Capital, the investment banking arm of the British bank, and HSH Nordbank, the state-owned German bank that was created last year through the merger of two smaller lenders. Unless the two sides can hammer out a settlement, they are due to argue their differences in a London court in early February.
[b]
…
[/b] The immediate subject of the February court case is LB Kiel's $151m investment in Corvus. HSH alleges that it was misled about the nature of the CDO, and that the entity was subsequently mismanaged, especially in the period after September 11 2001 when the credit markets took a beating. The case does not cover the other $420m that was invested by LB Hamburg in another Barclays CDO called Nerva, though HSH says it is reviewing legal proceedings.
According to people close to HSH, the Barclays team created a series of interlocking CDOs, some of which were never offered to external investors, which had the effect of exposing HSH to risky credits such as aircraft leases and loans for manufactured housing without the bank's knowledge. When the underlying securities began to deteriorate, they triggered a cascade of downgrades by Fitch, the rating agency. The collapse was so rapid that within less than three years Corvus notes that had been assigned an AAA rating in December 2000 had been reduced to "junk" status.
Full article: http://news.ft.com/cms/s/20cf424e-5df6-11d9-ac01-00000e2511c8.html