REFILE-JBIC kicks scandal-plagued Barclays off five-year bond

Wed Jul 11, 2012 8:56pm IST

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* Bank pays price for indiscretions with bond mandate loss

* Three banks initially mandated, but only two run deal

By Philip Wright

LONDON, July 11 (IFR) - Barclays on Wednesday was dropped from a major Japanese bond deal, in what looks to be the first time it has lost business since admitting its role in the Libor rate-fixing scandal.

The Japan Bank for International Cooperation (JBIC), which included Barclays among three banks assisting in the deal when it was announced in May, left them out of the final offering.

"Barclays was dropped because of reasons related to reputational and counterparty risk issues," said one banker with knowledge of the process.

"I haven't seen any other specific examples yet of it impacting them, but clients are more sensitive to this stuff now," said the banker. "It's not an easy time for them."

Barclays confirmed it had been left off of the deal, which sources in the market said could reach US$1 billion in bond sales -- large enough to earn a hefty sum in fees.

The five-year bond, which is expected to price later on Wednesday, is now being handled by Bank of America Merrill Lynch and HSBC alone.

"We cannot comment about anything, because from our side we have not made anything public about the deal," a JBIC official said.

A source with knowledge of the transaction called the move a "unique situation" and downplayed suggestions that Barclays may end up being shut out of business in Japan and elsewhere.

Barclays took part in two other bond deals for Japanese borrowers, Sumitomo Mitsui Banking Corp and NTT, this week.

But there is a long tradition in Japanese business of doing everything possible to avoid public scandal, particularly at those institutions, such as JBIC, that are government-related.

The Japan Housing Finance Agency, another government-related entity, on Monday dropped Nomura -- under investigation for insider-trading offences -- from two transactions.

Barclays was fined more than $450 million for manipulating Libor, an interbank interest rate that underpins hundreds of trillions of dollars in transactions around the world.

Chief executive Bob Diamond resigned last week over the scandal, which claimed the scalps of other Barclays executives and has led to an onslaught of negative media attention.

An official at a Japanese bank on Wednesday declined to comment on the decision to cut Barclays from the JBIC transaction.

"Whether this is connected to the recent press stories about that firm," the official said, "I leave you to speculate upon."

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