Credit exposures: Barclays pays up for Protium protection

Barclays’ decision last month to move $12.3 billion of credit market assets to a Cayman Islands-registered fund prompted a frenzy of interest, combining as it did the twin bogeymen of toxic assets and off-balance-sheet vehicles. Barclays chief executive John Varley describes the deal as a further step in its "efforts to manage down the quantum and volatility of our credit market exposures" – already reduced by 30% in the first half of 2009. But it seems to be driven far more by concern about the monoline guarantors that wrapped many of these securities rather than the assets themselves. The transaction involves the sale of $2.3 billion of US RMBS, $1.8 billion of whole loans and $8.2 billion of assets wrapped with monoline guarantees to a fund, Protium Finance LP. Protium is a medicine frequently used to treat heartburn and acid reflux – not the most promising indicator of the desirability of the portfolio.