Forbes- Barclays now has to grapple with both a buyout and a bailout. Midway through its gargantuan takeover bid for Dutch rival ABN Amro, the British bank said it is rescuing a hedge fund client with a $1.6 billion loan.
Yet the lender has managed to save face. Shares in Barclays closed up 3.0%, to 615 pence ($12.40), after the bank reassured investors that Cairn Capital, the hedge fund to which its investment banking division sold a structured investment vehicle, would simply change the type of financial instruments it would use from Barclays.
Barclays Capital is one of the financial market’s main providers of SIV-lites, a financial product which is designed to help clients–typically hedge funds or other banks–make money from the difference between short-term and long-term borrowing rates.
These vehicles, often given fancy names, have funded portfolios of American mortgage-backed securities and other assets with short-term funding from the commercial paper markets.
