Barclays to take pounds 76m charge after B&C settlement agreed

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The Independent Online
BARCLAYS BANK, whose chief executive Martin Taylor quit last month, is to take a pounds 76m charge against its 1998 results after agreeing to an out-of-court settlement with the administrators of British & Commonwealth Holdings, Ernst & Young.

B&C,which had been built up by buccaneering entrepreneur John Gunn in the 1980s, crashed in 1990, leaving behind it pounds 1.3bn in debts. The circumstances of the collapse were later the subject of a Department of Trade and Industry report.

Barclays could have faced claims of up to pounds 1bn arising from the role of BZW, its former subsidiary, in advising on the disastrous acquisition by B&C of Atlantic Computers in 1988. The case had been due to come to court in May next year. Proceedings were expected to last 15 months.

The full cost to Barclays of the total pounds 150m settlement is pounds 116m. However, the bank hopes that pounds 40m of that will be covered by insurance.

News of the fresh profits charge comes just weeks after Barclays warned that profits for the year would be pounds 1.9bn, well below what most in the City had been expecting. The 1998 profit figures are due out in mid-February.

Analysts said that it was just another negative item of news at the end of what for Barclays Bank could only be described as an "annus horribilis". However, they were relieved Barclays could now draw a line under the B&C affair.

Richard Coleman, banking analyst at Merrill Lynch, the investment bank, said: "Barclays was always going to lose. It was the only one that had any money. It is one of the ghosts of the past and has been laid to rest."

The deal with Barclays and the other parties involved, which include NM Rothschild, the merchant bank, former auditors Spicer & Pegler, and accountants Coopers & Lybrand, was struck after a private mediation by the former law lord, Lord Griffiths.

Following the settlement, the administrators expect to pay out a further dividend to banking creditors of 3p in the pound, as a result of which they will have had their claims excluding interest fully met. The non- banking creditors can expect a further payout of up to 40p, which will bring the total recouped for this category of creditors to 86p in the pound.

Ironically, the largest creditor is Barclays, which took a pounds 100m provision in 1990 to cover its B&C loans.

Ernst & Young said yesterday that the amount that will have been paid out to creditors vastly exceeds the original estimates of what was recoverable.

Barclays shed 4p to 1,424p.