Barclays Bank is the business savvy British bank that profited from America’s financial meltdown. While we were all worried about losing money in our 401Ks and other bankers stricken with fear by the tumbling economy, Barclay’s Bank chose to take a risk. The bank decided it would purchase the USA’s 4th largest investment bank, Lehman Brothers. This risky deal allowed Barclays Bank to acquire all of Lehman Brothers best assets while taking on little of their liabilities. Lehman Brothers was one of the worst casualties of the subprime mortgage crisis. Prior to the meltdown, in 2007, the company was worth approximately $45 billion but its stock price began to free fall as it reported $4 billion in write-downs.
This led to credit rating downgrades and as a result, Lehman Brothers was unable to raise the capital it needed. Eventually, the investment bank ran out of options and had to declare bankruptcy. Filing for Chapter 11 helped Lehman Brothers protect itself from potential lawsuits from its creditors and would give them the much needed time to re-organize the company.
However, it was at this point of bankruptcy, Barclays Bank had Lehman Brothers in their crosshairs. Since Lehman Brothers declared bankruptcy Barclays Bank could now acquire its best assets while not owning any of the $600 billion in liabilities the troubled investment bank had. This allowed Barclays Bank to develop its stock underwriting and merger advice businesses as these were some o f Lehman Brothers’ strongest assets.