Well, surprise, surpriae, one year later, the value of the land has dropped, LandSource’s members would not rebalance the loan to value ratio by making additional capital contributions to their LLC which would be used to pay down the bondholders. And who is lead agent and bookrunner for the first lien bonds? Barclays Bank PLC. And who is the lead agent and bookrunner for the second lien bonds? Barclays Bank PLC. Back in the simple days of loan participations, Barclays would be considered to have an inherent conflict of interest in acting in the best interests of the first lien bondholders/loan participants, when those bests interests may necessitate screwing over the second lien bondholders/loan participants.

So, was Barclays Capital negligent in underwriting the LandSource bond deal? There’s some great case law arising out of the Orange County Bankruptcy which talks about what a securities underwriter is supposed to do to protect the interests of the bondholders BEFORE the deal is closed. And there’s a ton of case law arising out of old fashioned loan participation litigation where the lead lender is considered a fiduciary, has a conflict of interest and makes the wrong decisions.

So maybe Barclays Bank and Barclays Capital have some ordinary stupid investment problems, but they also have a gigantic $1.3Billion albatross around their necks in the form of this bond offering.

And of by the way, the question of whether most of the land which is collateral for these funds will actually have a reliable drinking water supply is “IFFY”.

I, for one, advocate a national examination for investment bankers and traditional bankers, kind of like the medical exam and bar exam, and national licensing for anyone who makes these idiotic investment decisions.