Barclays Posts $591M Loss on Snafu Debt Sale

Barclays has exceeded an agreed limit on sales of structured notes. REUTERS/Peter Nicholls


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PETER NICHOLLS/REUTERS

Barclay’s BCS -0.22%

PLC said it is buying back a bunch of structured notes at a loss of about £450m or $591m after selling too many of them.

Structured Notes are a type of debt instrument that are tied to an underlying reference such as the S&P 500 or oil. The British bank had registered with the US Securities and Exchange Commission to sell up to $ 20.8 billion of these bonds. It exceeded the limit by $15.2 billion, the company said.

Barclays said it was conducting an investigation into the matter. Regulators are also “conducting investigations and making requests for information,” the bank said. As a result, the bank will delay the start of its £1 billion share buyback program until the second quarter.

Barclays shares fell 3.6% on Monday after the news broke, its biggest drop in three weeks.

Analysts and investors struggled to understand the announcement.

“I’ve seen a lot of structured notes, but I’ve never seen anything like this before,” said Joseph Dickerson, equity research analyst at Jefferies.

“It looks like an operational or legal failure,” said Jerome Legras, managing partner at Axiom Alternative Investments, a fund specializing in bank debt. “It’s hard to believe they would do something that stupid. This is honestly the first time I’ve heard of something like this.”

Holders of the structured notes include individuals and funds. Barclays must buy the notes at the original purchase price. The estimated loss suggests that a significant portion of the debt is currently trading below this level.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

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