Barclays 2004 Annual Report Download - page 151

14 Loans and advances to customers (continued)
Securitised transactions
Loans and advances to customers include balances which have been securitised. These balances are either accounted for on the basis of linked
presentation or separate recognition of the gross assets and related funding.
Linked presentation
Loans and advances to customers include certain securitised loans, subject to non-recourse finance arrangements, which meet the requirements
for linked presentation under FRS 5 ‘Reporting the substance of transactions’.
Linked presentation has been applied for these loans and the net of the loan and finance is included within Loans and advances to customers on
the balance sheet, as follows:
2004 2003
£m £m
Gross loan receivable 4,540 81
Non-recourse finance (4,446) (80)
Net amount reported in Loans and advances to customers 94 1
Barclays Bank S.A., Spain
Barclays securitised two static pools of residential mortgage loans originated by Barclays Bank S.A., domiciled in Spain. Both securitisations
were effected through the sale of mortgage shares to, respectively, AyT Génova Hipotecario II, Fondo de Titulización Hipotecario(‘Genova II’)
and AyT Génova Hipotecario III, Fondo de Titulización Hipotecario (‘Genova III’) (each an ‘Issuer’). Each Issuer is a fund which is managed by
Ahorro Y Titulización S.G.F.T. S.A. (the ‘Managing Company’).
To fund the acquisition of these mortgage shares, each Issuer issued floating rate notes (‘FRNs’). All FRNs were publicly subscribed. The offering
circulars for both issues of FRNs stated that they are the obligations of the respective Issuer only and are not guaranteed by, or the responsibility
of, any other party. Non-returnable proceeds of these two securitisation issues totalled ¤1.6bn at issue. Each Issuer has entered into a swap
agreement with Barclays Bank PLC, Spain branch under which each pays the floating rate of interest on the respective mortgage loans and
receives interest linked to 3 month Euribor. The proceeds generated from the loans are used in each case in priority to meet the claims of the
FRN holders, after the payment of Managing Company and administration expenses and amounts payable in respect of the interest rate swap
arrangements. As at 31st December 2004, the outstanding balance on non-returnable proceeds of these two securitisation issues totalled
¤1,408m (£996m).
There is no option to transfer additional assets to either of the Issuers. The Managing Company has the right to liquidate the fund if the principal
balance of the mortgage shares has fallen below 10% of their initial amount provided all obligations under the bonds can be satisfied in full.
In circumstances considered to be remote, the Managing Company also has the right to offer to the market to sell the pool of assets remaining
at the time. The price achieved must be the best of five bids given by five major players in the market. Only in these circumstances and on this
pricing basis, Barclays Bank S.A. has an option, but not an obligation, to re-purchase the assets then remaining. Barclays Bank PLC Spain branch
has provided two subordinated loans to each Issuer in respect of a reserve fund and initial expenses. Barclays Bank S.A. is also remunerated for its
roles as Financial Agent and Manager of the mortgage loans on behalf of the Managing Company.
The directors of each of the Issuers have confirmed that Barclays Bank S.A., is not obliged and does not intend to support any losses beyond the
recourse to the mortgage loan assets underlying each issue.
Barclays is not obliged, beyond any obligations mentioned above, to support any losses that may be suffered by the FRN holders and does not
intend to provide such support.
In 2004 Barclays recognised net income of £0.6m arising from these securitisations, which comprised £0.1m as financial agent and mortgage
originator and £0.5m as the amount remaining in Genova II and Genova III after making all other payments in priority.
Barclays Capital, New York
In 2004, Barclays securitised ten static pools of residential mortgage loans in the US, which were originated by unaffiliated mortgage companies.
All of the securitisations were effected through the sale of mortgage loans to trusts that are bankruptcy remote from Barclays.
To fund the acquisition of these mortgage loans, the trust issued FRNs. The FRNs were underwritten by Barclays and sold to third party investors.
Barclays often retained a residual interest in the securitisation for which financial consideration was given. The offering circulars for the issues
of FRNs stated that they are the obligations of the respective trust only and are not guaranteed by, or the responsibility of, any other party.
Non-returnable proceeds of these securitisations totalled $7,780m at issue. At 31st December 2004, the outstanding balance on non-returnable
proceeds of these securitisation issues totalled $6,629m (£3,450m).
There is no option to transfer additional assets to any of the trusts. A call right exists with the right to liquidate the trust if the principal balance
of the mortgage shares has fallen below 10% of their initial amount, provided all obligations under the bonds can be satisfied in full.
Barclays PLC Annual Report 2004
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