Detroit could pay higher loan rate, unsealed letter shows

By Tom Hals and Karen Pierog

Mon Nov 18, 2013 8:41pm EST

Nov 18 (Reuters) - Detroit could end up paying almost twice as much in interest as previously disclosed on a $350 million loan arranged by Barclays Capital, according to a fee letter made public on Monday after a judge ordered it unsealed last week.

U.S. Judge Steven Rhodes on Thursday thwarted efforts to keep the cost of a debtor-in-possession (DIP) financing under wraps, noting the so-called fee letter was subject to Michigan's Freedom of Information Act.

The letter disclosed that Barclays would collect 1.25 percent of the loan, but not less than $750,000, for committing to a controversial financing deal with Detroit.

The city and Barclays Capital had requested the fees be kept a secret because the details are commercially sensitive and might raise the price of the loan.

Barclays declined to comment and the spokesman for the city state-appointed emergency manager did not immediately respond to a request for comment.

One financial adviser who specializes in restructuring work said opponents of Detroit's proposed bankruptcy could object to the "market flex" provision of the fee letter.

"In Detroit you'll see objections to everything. I wouldn't be surprised if you see this market flex become a bigger part of the discussion," he said. He said the fees were "not all that egregious" for the size of the loan.

Opponents to Detroit's bankruptcy could try to make the argument that the flex provision essentially allows the interest on the loan to be raised to 6.5 percent from the 3.5 percent previously cited by the city.

Barclays is allowed raise the rate within 90 days of the closing of the loan if the bank is unable to find investors to buy up to half the loan, according to the unsealed fee letter.

Detroit reached the loan agreement with Barclays, a unit of Britain's Barclay's Plc, in October, but the deal still must be approved by the judge. About $230 million of the proceeds would be used to end interest-rate swaps contracts that the city has with Bank of America Corp's Merrill Lynch Capital Services and UBS AG. The swaps were related to pension debt sold by Detroit.

About $120 million of the DIP financing would be used to improve city services. The financing would be largely secured with a pledge of Detroit's income tax and casino tax revenue. The city has said the financing will carry a rate of the London Interbank Offered Rate (LIBOR) plus 2.5 percent, subject to market fluctuations, the city said in October. The loan terms set the LIBOR at no lower than 1 percent, which is well above its current rate.

Bond insurers and others have objected to Detroit's proposal to pay off its swap counterparties ahead of other creditors.

Rhodes, who is overseeing the historic municipal bankruptcy case Detroit filed in July, has scheduled a hearing beginning Dec. 10 to decide whether or not to approve the financing.

The Barclays financing was arranged after considering proposals from 16 potential lenders.

The financial adviser said those that lost out on the opportunity to lend to the city might now present alternatives to the judge with the argument that the "market flex" rates could make Barclays loan less competitive.

Detroit is the first large U.S. city to seek DIP financing after filing for the biggest Chapter 9 municipal bankruptcy in U.S. history. Rhodes can rule at any time on whether the city meets eligibility requirements for bankruptcy, which include insolvency and good-faith negotiations with creditors ahead of the filing.

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BRIEF- KPN reaches tentative agreement on settlement of KPNQwest

AMSTERDAM Tue Nov 19, 2013 2:42am EST

AMSTERDAM Nov 19 (Reuters) - Koninklijke KPN NV : * Tentative deal on terms of potential settlement on litigation initiated by bankruptcy trustees of KPNQwest * Potential settlement will be 50 mln euros * Total claim of the trustees amounts to approximately euros 2.2 bln * To waive certain claims against the bankruptcy estate, which have been contested by the trustees * KPN, CenturyLink, trustees reached tentative agreement for total potential settlement of EUR 260 mln

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KPN reaches tentative settlement over KPNQwest bankruptcy

BRUSSELS Tue Nov 19, 2013 3:06am EST

BRUSSELS Nov 19 (Reuters) - Dutch telecoms group KPN said on Tuesday that it had reached a tentative agreement to pay 50 million euros ($67.6 million) to settle litigation related to the bankruptcy of its former joint venture KPNQwest.

KPNQwest, a wholesale fibre-optic telecoms venture between U.S. phone carrier Qwest, since acquired by CenturyLink, and KPN for corporate customers, was listed in 1999 but went bankrupt in 2002 after the telecoms and technology bubble burst.

The trustees accused KPNQwest of mismanagement and held its shareholders liable for damages. It had been seeking 2.2 billion euros.

KPN said in a statement on Tuesday that it, CenturyLink and the trustees had reached a tentative agreement for a potential total settlement of 260 million euros, towards which KPN would contribute 50 million euros.

The tentative agreement is subject to several conditions, including the approval of the Dutch bankruptcy court.

Assuming a definitive settlement is agreed, litigation will end and KPN will waive certain claims against the bankruptcy estate.

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Judge rules against ResCap noteholders, knocks legal tactics

Fri Nov 15, 2013 2:51pm EST

* Judge calls noteholder tactics "unfortunate"

* Judge describes ruling as a split decision

* Disputes to spill into Tuesday's confirmation hearing

By Tom Hals

Nov 15 (Reuters) - Residential Capital LLC, a bankrupt mortgage lender, won a court ruling on Friday that it does not owe approximately $340 million in interest claimed by junior secured noteholders.

The ruling sets the stage for hearings next week on ResCap's plan to exit bankruptcy. U.S. Bankruptcy Judge Martin Glenn also criticized the legal tactics of the noteholders, who are virtually alone in opposing that plan.

Glenn ruled that the holders of the junior secured notes are undersecured, which prevents them from collecting interest that accumulated since ResCap filed for bankruptcy in May 2012.

Glenn, in New York, described his 119-page opinion, which covered a range of disputes, as a split decision. He ended it by saying that the noteholders have chosen to "contest everything and concede nothing (even when the court has questioned whether they were acting in good faith)."

He said their conduct led to drawn-out proceedings that have reduced the money available for other creditors.

"This is unfortunate!" Glenn wrote.

Aurelius Capital Management and Marathon Asset Management, two of the largest holders of the notes, did not immediately respond to requests for comment. Another investment firm holding a large amount of the notes, Davidson Kempner Capital Management, declined to comment.

Lewis Kruger, the chief restructuring officer for ResCap, declined to comment.

ResCap sought court protection on May 14, 2012, to address soaring mortgage liabilities. It had serviced about $374 billion of U.S. residential mortgage loans before its bankruptcy.

The dispute stems from a proposal to repay creditors that was backed by ResCap and its committee of unsecured creditors and funded with a $2.1 billion payment by parent Ally Financial Inc.

The proposed plan would pay junior secured noteholders $2.2 billion, which is their entire principal and the interest that was due prior to the bankruptcy.

However, the investment funds disputed that their notes were undersecured, and a trial on the issue began in October.

In his ruling on Friday, Glenn found the noteholders' collateral is worth $1.9 billion, less than the value of the securities and therefore leaving the notes undersecured.

Glenn wrote that he expected the noteholders to continue their give-no-ground approach in a hearing on ResCap's plan of reorganization, which is scheduled to begin on Tuesday.

U.S. taxpayers own roughly three-quarters of Ally, which was once part of General Motors Corp and which did not file for bankruptcy protection. Ally is focusing on auto lending, and trying to repay billions of dollars it still owes the government.

The case is In re Residential Capital LLC, U.S. Bankruptcy Court for the Southern District of New York, No. 12-12020.

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UPDATE 1-Max Bahr to enter liquidation after sale talks fail

Fri Nov 15, 2013 10:10am EST

* Talks with peer Hellweg fail over demands from RBS

* Hellweg unwilling to grant RBS a full guarantee

* Max Bahr to be sold off piecemeal, 3,600 jobs at risk (Adds statement from administrator)

By Arno Schuetze and Alexander Hübner

FRANKFURT, Nov 15 (Reuters) - Insolvent German home improvement store chain Max Bahr is to enter liquidation after talks to sell the retailer to rival Hellweg failed, its administrator said on Friday.

Max Bahr's parent Praktiker is already being liquidated after the administrator failed to find a buyer for the whole group.

The Max Bahr negotiations were at an advanced stage but collapsed over demands from Royal Bank of Scotland, owner of 66 of the chain's 73 buildings, the administrator said. He added that 3,600 jobs are now at risk.

Hellweg had teamed up with former Max Bahr chief Dirk Moehrle to make an offer of more than 100 million euros ($134 million), sources told Reuters last month.

But Hellweg declined to grant RBS a guarantee that would have enabled the bank to hold it accountable if Max Bahr ran into financial trouble, the administrator said. No-one at Hellweg was available for comment.

RBS, which declined comment on the matter, is now looking to rent out the Max Bahr sites. OBI, Rewe/Toom and Hagebau have expressed interest in about half the sites, two people familiar with the situation said.

RBS also turned down a bid from German DIY group Globus, which had offered to buy 60 Max Bahr outlets, after RBS had already turned down an earlier offer from Globus to rent stores, albeit at lower prices, another source said.

Praktiker, whose blue and yellow branded stores selling paints, tools and gardening products are a familiar sight in Germany's out-of-town shopping centres and which employed around 20,000 full- and part-time staff, filed for insolvency in July after talks with creditors failed.

The creditors had hoped that a sale of Max Bahr could help them recover some of their losses, but those hopes died when Max Bahr also filed for insolvency.

The Praktiker stores have already started a clearance sale and the same will now shortly happen in Max Bahr stores.

($1 = 0.7430 euros) (Editing by David Goodman and David Holmes)

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LightSquared lodges claims against Ergen, Dish

By Billy Cheung and Amanda Becker

NEW YORK Sun Nov 17, 2013 2:00pm EST

NEW YORK Nov 17 (Reuters) - Bankrupt wireless communications firm LightSquared Inc has filed a lawsuit accusing Dish Network Corp and its chairman, Charles Ergen, of improperly trying to take control of LightSquared's broadband spectrum.

The lawsuit, filed in the U.S. bankruptcy court in New York late on Friday, is an effort to revive an earlier case by LightSquared's controlling stakeholder, Phil Falcone's Harbinger Capital Partners, that was thrown out last month.

LightSquared alleges that Dish, Ergen, and other Ergen-controlled entities made improper trades and violated a key credit agreement in order to become LightSquared's largest creditor, with the intention of taking control of LightSquared's spectrum, the airwaves used for wireless communications.

A spokesman for Dish called the allegations a "desperate measure" by LightSquared to avoid selling its assets.

The lawsuit is the latest front in an ongoing battle between Ergen and Falcone for control of LightSquared.

LightSquared filed for Chapter 11 in May 2012 after the Federal Communications Commission tentatively blocked it from building a wireless network amid concerns that the signal from the network could interfere with the global positioning satellite industry.

In its lawsuit on Friday, LightSquared alleged that an Ergen entity surreptitiously amassed a controlling block of LightSquared loans. It said this entity delayed the closing of a number of large loan trades to hide the identity of the buyer, namely Ergen, and derail negotiations with creditors as LightSquared neared the end of a deadline to file a restructuring plan.

The cumulative effect was to provide Dish with substantial leverage over an auction of LightSquared's spectrum, which is set to be held in December, the lawsuit said.

The lawsuit seeks to disallow Ergen's claims in the bankruptcy process that result from the debt purchases and subordinate those claims behind other creditors. It is also seeking punitive and compensatory damages.

"This elaborate distraction seems designed to shift attention from years of LightSquared mismanagement leading to bankruptcy," Dish spokesman Bob Toevs wrote in an email.

ONGOING LITIGATION

LightSquared's complaint on Friday was styled as a "complaint-in-intervention," meaning LightSquared is essentially trying to step in as a plaintiff in an earlier lawsuit.

The lawsuit was originally filed in August by Harbinger, which owns about 80 percent of LightSquared. U.S. Bankruptcy Judge Shelley Chapman, who is overseeing LightSquared's restructuring, last month granted Ergen's request to dismiss the case, but said other LightSquared entities were not barred from bringing the allegations.

Harbinger and LightSquared's lenders have proposed competing plans for how to restructure LightSquared. Lenders are pushing for an auction while Harbinger has contended that it can pay back creditors and still retain ownership. Creditors are currently voting on the proposals, and the auction is ultimately expected to take place.

In separate litigation, LightSquared has sued members of the GPS industry, alleging they raised no concerns about interference until after LightSquared had pumped millions of dollars into its network. The defendants in that case, which include Deere & Co, on Friday sought to have the case moved to federal court from bankruptcy court.

The case is LightSquared Inc et al. v. Ergen et al., U.S. Bankruptcy Court for the Southern District of New York, No. 13-1390.

The bankruptcy is: In re LightSquared Inc., in the same court, No. 12-12080.

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Barclays finds home for riskiest CoCos yet

Fri Nov 15, 2013 8:21am EST

* UK bank attracts US$10bn of orders for Additional Tier 1 bond

* European issuers look to put dent in EUR600bn capital pile

* Market praises Barclays for careful execution

By Aimee Donnellan

LONDON, Nov 15 (IFR) - A high-risk jumbo CoCo sold by Barclays this week has revealed the deep pockets of the US investor base and opened the door for other European banks to begin tackling the EUR600bn capital pile that needs to be raised in the coming years.

The first Additional Tier 1 bond to target the US investor base had a lot riding on it. Barclays needs to raise a further US$1.25bn before June next year, European banks are coming under increasing pressure to boost their leverage ratios, and placing these instruments in the US market remains the cheapest option.

The market for these new-style hybrid bonds could grow to at least EUR450-600bn in Europe and US$400-500bn in the US, according to estimates by Citigroup.

"This is a very important trade for Barclays and other UK banks as it highlights the demand for equity convertible structures from the US investor base," said Peter Jurdjevic, head of balance sheet solutions at Barclays.

Barclays' own syndicate team, along with Citigroup, Deutsche Bank, Goldman Sachs, SMBC Nikko, UBS and Wells Fargo sold the SEC-registered deal mainly to US accounts.

Investors will receive an 8.25% coupon as a reward for the risks, which include being converted into equity should the bank's fully-loaded Core Tier 1 ratio fall below 7%, as well as coupons not being paid at all and being lost forever.

The 7% fully-loaded trigger excludes Barclays' GBP7.6bn loss-absorbing cushion of goodwill capital and is more aggressive than previous CoCo trades.

The deal's pricing and USD10bn order book should encourage other potential issuers into the market, which has already seen AT1 dollar bonds from Societe Generale and BBVA in Reg S format and a euro trade from Banco Popular Espanol.

"The fact that we have had a range of deals including a Spanish bank issue in the AT1 market, and now Barclays with a fully loaded high trigger instrument, shows the development of the market and will provide important pricing references for others seeking to access the space," said Mark Geller, head of European financial institutions syndicate at Barclays.

RAISE THOSE RATIOS

Global regulators have taken a more aggressive approach to force banks to clamp down on leverage - a measure of risk that regulators have recently brought into focus - and are allowing issuers to use Additional Tier 1 bonds to meet some of those requirements.

In the case of Barclays, the bank has been set a 3% leverage ratio target by the UK regulator which it needs to hit by June 2014. That ratio remained at 2.2% in the third quarter, even though the bank shed more than EUR100bn of assets and completed a GBP5.95bn rights issue.

Luckily for Barclays and other issuers of deeply subordinated debt, the market backdrop is incredibly supportive.

Yields have been falling across the bank capital spectrum in recent months, pushing investors into riskier securities.

Added to that, the cost of insuring subordinated bank debt has tightened throughout the course of the year, which in turn has driven down the coupons banks have to pay on these instruments.

But despite optimal market conditions, Additional Tier 1 is far from an easy sell. Coupon deferrals and a fully loaded high trigger are just some of the features Barclays had to include in its latest transaction to meet the UK's Prudential Regulation Authority and CRD IV requirements.

"The big worry for this transaction and ones like it is the coupon deferral risk," said Dierk Brandenburg, a senior bank credit analyst at Fidelity.

"The coupons are subordinated to the previous CoCos, but in this case you are slightly better off because you are getting equity instead of being written down to nothing if Barclays hits its trigger."

But US fund managers showed up in force - evidence, bankers say, that the market is maturing.

"Barclays has taken the whole market a step further with this transaction," said Simon McGeary, head of new products, EMEA, at Citigroup.

"They had grown up conversations with a new investor base, clearly set out the risks and mitigants for investors and have been rewarded for their efforts."

Barclays decided not to tighten pricing from initial thoughts in the low 8% range, setting final terms at 8.25% for what was a modestly sized USD2bn deal given the hefty level of orders.

"We deliberately determined to price the security to perform in the secondary market as a quid pro quo for the trust and loyalty showed by our principal investors who are vital in ensuring the development of this important asset class," said Steven Penketh, managing director at Barclays Bank.

The deal's success - bonds have traded up two points - should help the bank's next issue, and other borrowers' offerings too.

"The placement of this bond with a mixture of US, European and Asian real money accounts with a bit of hedge fund support will assist its liquidity and stability in the future and show other issuers the kinds of investors they can sell these instruments to," said Alexandra MacMahon, head of EMEA FIG debt capital markets at Citigroup.

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UPDATE 1-Max Bahr to enter liquidation after sale talks fail

Fri Nov 15, 2013 10:10am EST

* Talks with peer Hellweg fail over demands from RBS

* Hellweg unwilling to grant RBS a full guarantee

* Max Bahr to be sold off piecemeal, 3,600 jobs at risk (Adds statement from administrator)

By Arno Schuetze and Alexander Hübner

FRANKFURT, Nov 15 (Reuters) - Insolvent German home improvement store chain Max Bahr is to enter liquidation after talks to sell the retailer to rival Hellweg failed, its administrator said on Friday.

Max Bahr's parent Praktiker is already being liquidated after the administrator failed to find a buyer for the whole group.

The Max Bahr negotiations were at an advanced stage but collapsed over demands from Royal Bank of Scotland, owner of 66 of the chain's 73 buildings, the administrator said. He added that 3,600 jobs are now at risk.

Hellweg had teamed up with former Max Bahr chief Dirk Moehrle to make an offer of more than 100 million euros ($134 million), sources told Reuters last month.

But Hellweg declined to grant RBS a guarantee that would have enabled the bank to hold it accountable if Max Bahr ran into financial trouble, the administrator said. No-one at Hellweg was available for comment.

RBS, which declined comment on the matter, is now looking to rent out the Max Bahr sites. OBI, Rewe/Toom and Hagebau have expressed interest in about half the sites, two people familiar with the situation said.

RBS also turned down a bid from German DIY group Globus, which had offered to buy 60 Max Bahr outlets, after RBS had already turned down an earlier offer from Globus to rent stores, albeit at lower prices, another source said.

Praktiker, whose blue and yellow branded stores selling paints, tools and gardening products are a familiar sight in Germany's out-of-town shopping centres and which employed around 20,000 full- and part-time staff, filed for insolvency in July after talks with creditors failed.

The creditors had hoped that a sale of Max Bahr could help them recover some of their losses, but those hopes died when Max Bahr also filed for insolvency.

The Praktiker stores have already started a clearance sale and the same will now shortly happen in Max Bahr stores.

($1 = 0.7430 euros) (Editing by David Goodman and David Holmes)

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Judge rules against ResCap noteholders, knocks legal tactics

Fri Nov 15, 2013 2:51pm EST

* Judge calls noteholder tactics "unfortunate"

* Judge describes ruling as a split decision

* Disputes to spill into Tuesday's confirmation hearing

By Tom Hals

Nov 15 (Reuters) - Residential Capital LLC, a bankrupt mortgage lender, won a court ruling on Friday that it does not owe approximately $340 million in interest claimed by junior secured noteholders.

The ruling sets the stage for hearings next week on ResCap's plan to exit bankruptcy. U.S. Bankruptcy Judge Martin Glenn also criticized the legal tactics of the noteholders, who are virtually alone in opposing that plan.

Glenn ruled that the holders of the junior secured notes are undersecured, which prevents them from collecting interest that accumulated since ResCap filed for bankruptcy in May 2012.

Glenn, in New York, described his 119-page opinion, which covered a range of disputes, as a split decision. He ended it by saying that the noteholders have chosen to "contest everything and concede nothing (even when the court has questioned whether they were acting in good faith)."

He said their conduct led to drawn-out proceedings that have reduced the money available for other creditors.

"This is unfortunate!" Glenn wrote.

Aurelius Capital Management and Marathon Asset Management, two of the largest holders of the notes, did not immediately respond to requests for comment. Another investment firm holding a large amount of the notes, Davidson Kempner Capital Management, declined to comment.

Lewis Kruger, the chief restructuring officer for ResCap, declined to comment.

ResCap sought court protection on May 14, 2012, to address soaring mortgage liabilities. It had serviced about $374 billion of U.S. residential mortgage loans before its bankruptcy.

The dispute stems from a proposal to repay creditors that was backed by ResCap and its committee of unsecured creditors and funded with a $2.1 billion payment by parent Ally Financial Inc.

The proposed plan would pay junior secured noteholders $2.2 billion, which is their entire principal and the interest that was due prior to the bankruptcy.

However, the investment funds disputed that their notes were undersecured, and a trial on the issue began in October.

In his ruling on Friday, Glenn found the noteholders' collateral is worth $1.9 billion, less than the value of the securities and therefore leaving the notes undersecured.

Glenn wrote that he expected the noteholders to continue their give-no-ground approach in a hearing on ResCap's plan of reorganization, which is scheduled to begin on Tuesday.

U.S. taxpayers own roughly three-quarters of Ally, which was once part of General Motors Corp and which did not file for bankruptcy protection. Ally is focusing on auto lending, and trying to repay billions of dollars it still owes the government.

The case is In re Residential Capital LLC, U.S. Bankruptcy Court for the Southern District of New York, No. 12-12020.

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Barclays finds home for riskiest CoCos yet

Fri Nov 15, 2013 8:21am EST

* UK bank attracts US$10bn of orders for Additional Tier 1 bond

* European issuers look to put dent in EUR600bn capital pile

* Market praises Barclays for careful execution

By Aimee Donnellan

LONDON, Nov 15 (IFR) - A high-risk jumbo CoCo sold by Barclays this week has revealed the deep pockets of the US investor base and opened the door for other European banks to begin tackling the EUR600bn capital pile that needs to be raised in the coming years.

The first Additional Tier 1 bond to target the US investor base had a lot riding on it. Barclays needs to raise a further US$1.25bn before June next year, European banks are coming under increasing pressure to boost their leverage ratios, and placing these instruments in the US market remains the cheapest option.

The market for these new-style hybrid bonds could grow to at least EUR450-600bn in Europe and US$400-500bn in the US, according to estimates by Citigroup.

"This is a very important trade for Barclays and other UK banks as it highlights the demand for equity convertible structures from the US investor base," said Peter Jurdjevic, head of balance sheet solutions at Barclays.

Barclays' own syndicate team, along with Citigroup, Deutsche Bank, Goldman Sachs, SMBC Nikko, UBS and Wells Fargo sold the SEC-registered deal mainly to US accounts.

Investors will receive an 8.25% coupon as a reward for the risks, which include being converted into equity should the bank's fully-loaded Core Tier 1 ratio fall below 7%, as well as coupons not being paid at all and being lost forever.

The 7% fully-loaded trigger excludes Barclays' GBP7.6bn loss-absorbing cushion of goodwill capital and is more aggressive than previous CoCo trades.

The deal's pricing and USD10bn order book should encourage other potential issuers into the market, which has already seen AT1 dollar bonds from Societe Generale and BBVA in Reg S format and a euro trade from Banco Popular Espanol.

"The fact that we have had a range of deals including a Spanish bank issue in the AT1 market, and now Barclays with a fully loaded high trigger instrument, shows the development of the market and will provide important pricing references for others seeking to access the space," said Mark Geller, head of European financial institutions syndicate at Barclays.

RAISE THOSE RATIOS

Global regulators have taken a more aggressive approach to force banks to clamp down on leverage - a measure of risk that regulators have recently brought into focus - and are allowing issuers to use Additional Tier 1 bonds to meet some of those requirements.

In the case of Barclays, the bank has been set a 3% leverage ratio target by the UK regulator which it needs to hit by June 2014. That ratio remained at 2.2% in the third quarter, even though the bank shed more than EUR100bn of assets and completed a GBP5.95bn rights issue.

Luckily for Barclays and other issuers of deeply subordinated debt, the market backdrop is incredibly supportive.

Yields have been falling across the bank capital spectrum in recent months, pushing investors into riskier securities.

Added to that, the cost of insuring subordinated bank debt has tightened throughout the course of the year, which in turn has driven down the coupons banks have to pay on these instruments.

But despite optimal market conditions, Additional Tier 1 is far from an easy sell. Coupon deferrals and a fully loaded high trigger are just some of the features Barclays had to include in its latest transaction to meet the UK's Prudential Regulation Authority and CRD IV requirements.

"The big worry for this transaction and ones like it is the coupon deferral risk," said Dierk Brandenburg, a senior bank credit analyst at Fidelity.

"The coupons are subordinated to the previous CoCos, but in this case you are slightly better off because you are getting equity instead of being written down to nothing if Barclays hits its trigger."

But US fund managers showed up in force - evidence, bankers say, that the market is maturing.

"Barclays has taken the whole market a step further with this transaction," said Simon McGeary, head of new products, EMEA, at Citigroup.

"They had grown up conversations with a new investor base, clearly set out the risks and mitigants for investors and have been rewarded for their efforts."

Barclays decided not to tighten pricing from initial thoughts in the low 8% range, setting final terms at 8.25% for what was a modestly sized USD2bn deal given the hefty level of orders.

"We deliberately determined to price the security to perform in the secondary market as a quid pro quo for the trust and loyalty showed by our principal investors who are vital in ensuring the development of this important asset class," said Steven Penketh, managing director at Barclays Bank.

The deal's success - bonds have traded up two points - should help the bank's next issue, and other borrowers' offerings too.

"The placement of this bond with a mixture of US, European and Asian real money accounts with a bit of hedge fund support will assist its liquidity and stability in the future and show other issuers the kinds of investors they can sell these instruments to," said Alexandra MacMahon, head of EMEA FIG debt capital markets at Citigroup.

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