Barclays is launching one of the largest ever sales of corporate loan risk by a UK bank this week, hot on the heels of a similar deal from HSBC, which is currently being shown to investors.

HSBC could price its £2bn sale of corporate loans from its own balance sheet as early as next week, according to one person close to the deal. But that issue is about to be trumped by Barclays £5bn deal.

The sales take the form of collateralised loan obligations, but while HSBC’s is a true sale cash CLO of the loans on its balance sheet, Barclays’ deal will be a fully-funded synthetic CLO.

The Barclays deal, while being constructed from credit derivatives rather than the actual loans, will still act similarly to the HSBC cash deal because almost the full amount of the deal will be sold in £4.41bn of AAA-rated super senior tranches.

The assets backing the deal come from Barclays £8bn book of loans to small and medium-sized enterprises and is designed to give the bank regulatory and economic capital relief on its balance sheet.

HSBC is set to sell all tranches of its deal down to the sub-investment grade BB-rated tranches and will retain only £40m of first-loss exposure in an unrated tranche, according to a person close to the deal.

The Barclays sale takes the form of a huge super senior tranche with a number of other small tranches.

Standard & Poor’s, the rating agency, which issued its ratings on the deal on Monday, said the exact splits between each class of note into pound sterling, euros and US dollars would be determined when the deal had closed.

Get alerts on Capital markets when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article