By Steve Slater
LONDON, April 7 (Reuters) - Barclays has reached a settlement with a UK care home operator weeks before the start of a court case that was seen as a test case for whether customers might sue banks over the manipulation of Libor interest rates.
Barclays had been accused by the care home operator of mis-selling products linked to benchmark interest rates and senior Barclays employees and former executives, including former chief executive Bob Diamond, had been due to testify at the trial.
The case was being closely watched by banks and their customers, after Barclays and several other lenders were fined for manipulating Libor or its euro equivalent Euribor.
If Barclays had lost it was expected to open the door for more bank clients to claim they were mis-sold products linked to Libor.
Graiseley Properties, the parent of Guardian Care Homes, had claimed that interest rate hedging products it was sold by Barclays were invalid because the bank had manipulated Libor rates, to which some of the products' prices were linked.
It sued Barclays for 70 million pounds ($116 million). Barclays said Guardian owed it the same amount, and was trying to get out of repaying it.
"The parties have negotiated and agreed to a commercial restructuring of Graiseley's debt, which reflects the impact of changes in conditions in this sector over the last few years. Graiseley has withdrawn the litigation," a spokesman for Barclays said.
Guardian Care Homes and its law firm could not be reached for comment.
The terms of the settlement were not released.
The battle in London's High Court was due to go to trial on April 29 and had been expected to last for about six weeks. It had been due to be the first case tied to the manipulation of Libor to reach trial. Deutsche Bank is also involved in a London court case tied to benchmark rates.
Barclays had already had to hand over thousands of emails and other documents from its former bosses and staff.
Diamond, former investment bank bosses Rich Ricci and Jerry del Missier, and former finance director Chris Lucas were among 23 people who had been called as witnesses for the trial.
Diamond and del Missier left Barclays in 2012 shortly after Barclays agreed to pay a $450 million settlement with U.S. and UK authorities due to alleged Libor manipulation.
Guardian Care Homes' lawyers had said a $4 billion fund run by Barclays profited from low 3-month sterling Libor rates so the bank benefited from the downward manipulation of Libor, while at the same time selling customers an interest rate hedging product "on the basis that Barclays believed rates would go up".
($1 = 0.6020 British Pounds) (Editing by Matt Scuffham and Mark Potter)