Barclays 2010 Annual Report Download - page 116

C. Other Credit Market
C1. Leveraged Finance
Leveraged finance loans, by region
As at 31st December 2010
£m
2009
£m
UK 4,238 4,530
Europe 789 1,051
Asia 172 165
US 635
Total lending and commitments 5,205 5,781
Impairment (275) (274)
Net lending and commitments as at 31st December 4,930 5,507
At 31st December 2010, the net exposure relating to leveraged finance loans reduced £577m to £4,930m (2009: £5,507m) reflecting net paydowns
and other movements of £302m, impairment charges of £242m (2009: £396m) and the depreciation of the Euro against Sterling driving currency
decreases of £33m.
C2. SIVs, SIV-Lites and CDPCs
SIV and SIV-lite positions comprise liquidity facilities and derivatives. At 31st December 2010 exposures decreased by £139m to £391m (2009: £530m).
Credit Derivative Product Companies (CDPCs) positions at 31st December 2010 reduced by £15m to £8m (2009: £23m).
C3. Monoline Protection on CLO and Other
The table below shows Collateralised Loan Obligations (CLOs) and other assets where Barclays held protection from monoline insurers as at
31st December 2010.
By rating of the monoline
Notional
£m
Fair value of
underlying
asset
£m
Fair value
exposure
£m
Credit
valuation
adjustment
£m
Net
exposure
£m
As at 31st December 2010
AAA/AA 7,324 6,004 1,320 (88) 1,232
Non-investment grade:
– Fair value through profit and loss 742 581 161 (105) 56
– Loans and receivables 6,578 5,873 705 (352) 353
Total 14,644 12,458 2,186 (545) 1,641
As at 31st December 2009 £m £m £m £m £m
AAA/AA 7,336 5,731 1,605 (91) 1,514
Non-investment grade:
– Fair value through profit and loss 1,052 824 228 (175) 53
– Loans and receivables 9,116 7,994 1,122 (563) 559
Total 17,504 14,549 2,955 (829) 2,126
The movement in net exposure of £485m was driven by a decrease in the fair value exposure to monoline insurers of £527m and credit valuation
adjustments of £55m (2009: £528m), offset by currency appreciation of £97m.
CLO assets wrapped by non-investment grade rated monolines and classified as loans and receivables declined to a fair value of £5,873m (2009:
£7,994m), following the unwinding of certain protection during the year with a notional of £2,745m. As a result, there were CLO assets with a fair value
of £1,969m at 31st December 2010 (2009: £nil) no longer protected by a monoline insurer. The remaining assets continue to be measured at fair value
through profit and loss.
D. Loan to Protium
On 16th September 2009, Barclays Capital sold assets of £7,454m ($12,285m), including £5,087m ($8,384m) in credit market assets, to Protium
Finance LP (Protium), a newly established fund. As part of the transaction Barclays extended a $12,641m 10 year loan to Protium.
The table below includes all assets held by Protium as collateral for the loan. At 31st December 2010, there were assets wrapped by a monoline insurer
with a fair value of $4,806m (2009: $4,095m). Following the commutation of contracts with one monoline insurer in January 2011, there are no longer
any assets wrapped by monoline insurers. Cash and cash equivalents at 31st December 2010 were $1,364m (2009: $688m) including cash realised
from sales and paydowns and funds available to purchase third party assets. Other assets at 31st December 2010 were $811m (2009: $567m) including
residential mortgage-backed securities purchased by Protium post inception and other asset-backed securities.
Principal and interest payments have been received in accordance with contractual terms. However, following a reassessment of the expected realisation
period, the loan is carried at an amount equivalent to the fair value of the underlying collateral. This has resulted in an impairment charge of $824m (£532m).
Risk management
Credit risk management continued
114 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10