Barclays Plc, the U.K.'s third- biggest bank, says investors who bought commercial paper from Solent Capital Partners LLP's $4.5 billion Mainsail II Ltd. fund would be repaid in full under a restructuring proposal.
Mainsail is being forced to sell assets, including residential and commercial mortgage securities, because they aren't worth enough to support its debt. Barclays had committed to provide emergency financing to the fund run by hedge-fund manager Solent, according to a March report by Moody's Investors Service. Barclays and Solent are both based in London.
``The restructuring proposes that all commercial paper investors will be fully paid out at par at the same time when the restructuring is implemented through the provision of an additional liquidity facility underwritten by Barclays,'' according to a Mainsail statement released on the London Stock Exchange's news service today.
Companies that depend on commercial paper, which is debt due in 270 days or less, face funding shortages as investors refuse to buy paper that may be linked to U.S. subprime mortgages. Barclays said Aug. 31 that it provided a loan to a fund run by London-based Cairn Capital after the fund couldn't refinance commercial paper. Moody's said the bank also may provide emergency lending to a fund run by Geneva-based Avendis Group, which has been forced to sell assets because of a drop in value.
Barclays has proposed restructuring Mainsail's debt by creating an emergency-funding facility divided into three levels of risk, and it's in discussions to buy ``additional credit protection,'' the statement said. Barclays is talking to Mainsail's capital and mezzanine noteholders about having them buy the riskiest pieces, the statement said.
Standard & Poor's last month cut ratings on junior interests in Mainsail as much as 16 steps to CCC+ from the highest grade. The commercial paper's rating dropped three steps to A-3, the lowest short-term investment grade ranking.
Will Bowen, a spokesman for London-based Barclays, didn't immediately respond to a request for comment.
Florida Commercial Mortgage Loan provider Five Stars Mortgage offers a variety of commercial paper for their clients. Hard Money Commercial loans are becoming more and more popular.