Barclays said to steer clear of Lehman ETNs

Barclays PLC won’t be “assuming the obligation” of traditional structured products and exchange traded notes issued by Lehman Brothers Holdings Inc., according to a source close to the situation.
SEP 22, 2008
Barclays PLC won’t be “assuming the obligation” of traditional structured products and exchange traded notes issued by Lehman Brothers Holdings Inc., according to a source close to the situation. Lehman Brothers of New York filed for bankruptcy last week. At that time, several industry experts speculated that because London-based Barclays had agreed to purchase Lehman's U.S. investment-banking and capital markets business, investors in Lehman's structured products would be safe. In the most general sense, structured products, which are created and backed by investment banks, involve the use of derivatives to meet specific investment objectives. An ETN is a type of structured product that trades on an exchange in much the same way as an exchange traded fund. Lehman Brothers offered both traditional structured products and ETNs. That Barclays won’t assume the obligation of Lehman Brothers’ structured products is disappointing, said John D. Seitzer, president and founder of Everest Wealth Management LLC, a Leawood, Kan.-based adviser with $30 million under management. It means that holders of Lehman Brothers’ structured products “have the same standing as other Lehman holding company senior, unsecured debt, which is trading at 15 to 20 cents on the dollar,” said Mr. Seitzer, who himself purchased Lehman structured products in July. It also means that nervous investors will likely shy away from all structure products, he said. “The market will definitely shrink,” Mr. Seitzer said.

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