French bank Credit Agricole has unloaded a risky portfolio worth 14 billion euros ($18 billion) to a US hedge fund in what could become a growing trend, the Financial Times said Friday. CA passed the remains of a unit it had already closed to BlueMountain, a specialist in winding down risky assets, as the French bank seeks to boost capital and meet new EU capital requirements, the report said.
The portfolio comprises "thousands of outstanding derivative contracts related to corporate bonds," the FT said, and would cut CA's risk-weighted assets by 14 billion euros. The report quoted BlueMountain chief executive Andrew Feldstein as saying that CA could have wound down the portfolio itself, "but it would have taken them many years. We think we can unwind the portfolio somewhat faster."
Feldstein added that "the transaction is part of the trend in the market where banks like Credit Agtricole are transferring credit risk to firms like BlueMountain with specialised expertise in managing these kinds of assets." BlueMountain is in talks "with other global banks over similar transactions, but this was its first such deal," the FT said, paraphrasing the company's CEO.
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