Barclays eyes Gulf for $11.8bn capital raise
London, November 1, 2008
British bank Barclays said it will raise £7.3 billion ($11.8 billion), mostly from investors in Abu Dhabi and Qatar, to bolster its finances amid the global credit crunch.
The fresh capital means that Barclays will not have to get extra funding from the British government, unlike some of its competitors, as it grapples with the fallout from the worst financial crisis in decades.
'The board of directors of Barclays announces a proposal to raise up to £7.3 billion of additional capital from existing and new strategic and institutional investors,' the bank said.
The cash injection would see Abu Dhabi's Shaikh Mansour bin Zayed Al Nahyan, a new investor and the owner of English Premier League football club Manchester City, owning as much as 16.3 per cent of Barclays.
Qatar, meanwhile, could ramp up its stake to 15.5pc from the current level of 8.1pc.
The announcement ensures that Barclays meets higher capital targets which were set by Britain's Financial Services Authority last month.
In reaction, however, Barclays stock lost more than a fifth by the close of trading, finishing at 163 pence on London's FTSE-100 index of leading shares after earlier having risen sharply.
Analysts said the drop in the bank's share price was down to concerns over the terms struck with the Middle East investors.
Barclays, which has bought the US investment banking arm of now collapsed Lehman Brothers, also issued a trading update in which it said that pre-tax profits for the first three quarters of the year were 'slightly ahead' of the same period last year.
It added that it had credit market writedowns of £1.2bn but said these were mostly offset by gains made elsewhere.
The bank said that sovereign wealth fund Qatar Holding will invest £2bn and has subscribed for warrants to purchase a further £1.5bn of ordinary Barclays shares.
Shaikh Mansour, meanwhile, will provide £3.5bn, and has also subscribed for £1.5bn in ordinary share warrants.
Challenger, an investment vehicle which is owned by the chairman of Qatar Holding, Shaikh Hamad bin Jassim bin Jabr Al Thani, will invest a further £300 million in Barclays. The remaining £1.5bn will come from other institutional investors.
'Given the continuing uncertainties in world capital markets, the board of Barclays resolved to satisfy the capital raising requirements agreed with the UK authorities without delay,' Barclays chairman Marcus Agius said.
'This we have done. The board believes that this maintains Barclays as a strong, independent and well capitalised bank.'
In June, Barclays announced a share issue to raise £4.5bn.
Barclays is the latest international bank to raise new capital in a bid to bolster finances which have been hammered by losses related to the collapse of the US subprime or high-risk home loan sector.
Barclays' investor base has been transformed in the past two years, as it has raised funds from investors in China, Singapore and Japan as well as the Middle East and the bank expects to benefit commercially from the links as well as getting cash.
It was one of several British banks hit hard by the subsequent squeeze on global credit, with the government having to launch a half-trillion-pound rescue package, including up to £50bn to buy shares in the country's ailing banks.
Royal Bank of Scotland, Lloyds and HBOS have all been forced to take government funds which come with a price and a state stake, but Barclays said it would raise any necessary capital from investors.
Barclays is expected to try to raise another £3bn through a rights share issue which will be announced after it has published its full year results in February.