Untangling Barclays’ ETN Mess
Barclays Bank announced on Monday it will resume issuing and selling most of its exchange-traded notes after an internal error forced the bank to suspend its entire lineup of roughly 30 ETNs earlier this year.
The bank said in the press release that it expected to offer to rescind the purchases of $2.8 billion in ETNs and $14.8 billion in structured notes for eligible purchasers starting on Aug. 1, with the offer expiring on Sept. 12.
Barclays had initially halted new creations for the iPath Pure Beta Crude Oil ETN (OIL) and the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) as of March 14 after it accidentally overissued shares of the ETN, exceeding the amount allowed by its shelf registration statement for a period of roughly one year, according to statements by the firm. Barclays attributed the overissuance to a clerical error.
That was a contributing factor for Barclays needing to restate parts of its annual report last year in order to amend financial statements around internal controls. Because the annual report was mentioned in the prospectuses for all the ETNs in the Barclays lineup, the firm had to suspend sales of the products as of April 28 until the corrections could be made to the note registration and registration shelf statements.
Six ETNs will remain suspended, including OIL and VXX. The other four were presumably also part of the overissuance problem and are as follows:
iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZ)
iPath Series B Bloomberg Energy Subindex Total Return ETN (JJE)
In the latest press release, Barclays says that it will resume normal operations for the still-suspended ETNs once the rescission offer has expired, and will announce the dates for those products in the future.
It also noted that premiums and discounts that have developed for the ETNs set to resume normal operations could shrink or disappear, leading to potentially significant losses for those who purchased the products at a premium.
The bank further added that the premiums and discounts associated with the still-suspended ETNs could continue to grow.
Contact Heather Bell at heather.bell@etf.com
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