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Barclays Keeps The Lehman Tradition Alive

Barclays may not so big on credit market vol these days but they are big on keeping part of its former principal mortgage trading desk busy. A toxic asset stew of monoline wrapped structured credit assets, RMBS, and assorted other residential mortgage goodies totalling close to $12.5 billion will be moving (sort of) from Barclays to a newly established fund, R3 Capital Partners Protium Finance LP. At the helm of Protium we find Stephen King, former head of Barclays Capital's Principal Mortgage Trading Group and Michael Keeley, former Barclays Capital's management committee member. Protium is, in turn, managed by C12 Capital Management which is currently home to a fair number of other Barclays principal mortgage trading alumni.
Protium is paying for this bounty, at fair value of course, with $450 million in new equity and a $12.6 billion 10-year loan from the Barclay's mother ship. The assets remain on Barclays balance sheet for regulatory purposes while the task of dealing with the ongoing and varying definitions of fair value goes to justifying the management fees the former Barclettes will be collecting at the top of the waterfall. Evidently the MBS circle of life has not been broken.