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Barclays CEO Jes Staley Says Troubled Loan Deals Are Eye-Opener

Barclays CEO Jes Staley Says Troubled Loan Deals Are Eye-Opener

(Bloomberg) -- Barclays Plc Chief Executive Officer Jes Staley, whose bank is among lenders sitting on $2 billion of risky corporate loans they’re struggling to sell, has warned of the dangers of poorly assembled deals.

Buyers of leveraged loans are shunning transactions that aren’t “structured properly,” Staley said in an interview with Bloomberg TV on Friday. Banks globally have been left holding parts of loans that funded at least seven private-equity deals, and Barclays was a lead underwriter on four of them.

“If you have a deal that’s not structured properly, that has some idiosyncratic weaknesses to it, the market can be pretty punishing at the bottom end,” said Staley.

Banks typically arrange leveraged loans to fund acquisitions for private-equity companies yet they’re rarely forced to come up with the cash themselves, instead selling on the debts to investors before deals close. The industry has surged in an era of rock-bottom interest rates -- and Staley has targeted the business as an area for growth -- yet it has begun showing some signs of stress amid fears of an economic slowdown and has prompted warnings from regulators.

“It’s a market that you have to have your eyes open to, you can still get the strong deals done,” Staley said. “We’re very comfortable with our portfolio, with our performance in the third quarter, but a couple of idiosyncratic deals have opened people’s eyes that it’s not a free ride right now.”

Barclays CEO Jes Staley Says Troubled Loan Deals Are Eye-Opener

Two of the troubled deals -- for invoice processing company OSG Billing Services and kitchen-cabinet maker ACProducts -- were underwritten before a sell-off in the market last year. Barclays, the sole underwriter on both, is still holding around half of each financing, Bloomberg reported.

Barclays has arranged about $16.2 billion of new U.S. leveraged-loan deals so far this year, dropping two places to fifth among underwriters compared with 2018, data compiled by Bloomberg show. The U.K. bank’s team has had a “very good year,” Staley said.

--With assistance from Ruth McGavin.

To contact the reporters on this story: Donal Griffin in London at dgriffin10@bloomberg.net;Davide Scigliuzzo in New York at dscigliuzzo2@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Chris Vellacott, Marion Dakers

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