Jeremy Hodges and Kit Chellel London
Weeks before the trial was scheduled to start, Barclays has settled the first UK lawsuit filed over allegations that the bank manipulated the London interbank offered rate (Libor).
It had agreed to restructure the debt of Graiseley Properties, which filed the lawsuit, as part of the settlement, Barclays said on Monday. The plaintiff, part of the Guardian elderly care homes group, was seeking to rescind interest-rate hedging contracts linked to Libor.
The settlement spares the bank a trial that would have featured testimony from former Barclays officials, including ex-chief executive Bob Diamond. Regulators have fined banks including Barclays, UBS and Royal Bank of Scotland about $6 billion (R63bn) for manipulating Libor and related benchmarks that underpin about $300 trillion worth of transactions worldwide.
“To support the ongoing viability of Graiseley’s care home business, the parties have agreed to a commercial restructuring of Graiseley’s debt, which reflects the impact of changes in conditions in this sector over the last few years,” Barclays said. “Graiseley has withdrawn the litigation.”
Anthony Maton, Graiseley’s lawyer, did not immediately respond to an e-mail seeking comment on the lawsuit.
Barclays shares fell 2.65 percent by 11.38am in London.
“The question is: what happens to everyone else with claims over products tied to Libor?” asked Christopher Wheeler, an analyst at Mediobanca. “Though there is no precedent of Barclays admitting wrongdoing, this encourages more customers to come out” against it and other banks.
The case has featured correspondence from employees that gave an inside glimpse of the bank’s Libor operations. At a hearing last month, lawyers for Graiseley introduced a 2007 e-mail from Jerry Del Missier, the former chief operating officer of Barclays, describing the rates as a “fantasy”. He and Diamond resigned in the wake of the scandal in 2012.
Barclays has said Guardian owed about £70m (R1.2bn), including loans. The swaps, designed to lower its exposure to rising interest rates, ended up costing Guardian about £12m.
In court documents from a January hearing, Guardian’s lawyers said it could not get an overdraft or refinance its loans because of the dispute and its resources were “stretched to the limit”. They said its aim was “to be relieved of the financial burden of these instruments, to refinance and to start growing” the business again.
Guardian sued the bank to invalidate the swap, and added Libor allegations to its case, saying that it should have been told the benchmark was rigged.
The UK’s only other lawsuit linked to Libor rigging is Indian property firm Unitech’s case against Deutsche Bank. In November, Unitech, in a joint court of appeal hearing with Guardian, won permission to seek to void an interest-rate swap pegged to the benchmark.