How the Other Half Recapitalizes

From today’s International Herald Tribune:

Barclays to raise 7.3 billion pounds in share sales, mostly to Mideast nations

By Julia Werdigier
Friday, October 31, 2008

LONDON: Barclays plans to raise 7.3 billion pounds by selling shares to Abu Dhabi and Qatar to meet Britain’s new capital requirements for banks without the government’s help.

Barclays, one of Britain’s biggest banks, said Friday that it would sell 5.8 billion pounds, or $9.4 billion, of convertible notes, which could leave the Middle Eastern investors with as much as 32 percent of the bank. An additional 1.5 billion pounds would be raised by selling securities to new and existing institutional shareholders.

“One has to give Barclays credit for being able to raise that capital,” said Adrian Darley of Resolution Asset Management in London. “But it is also dilutive for shareholders, and even though this is enough to keep them operating, the question for Barclays remains whether it’s enough to give them flexibility to go after opportunities in the current market.”

Barclays said the new investments would also help broaden the its relationships in the Middle East and Asia, regions that gained clout in the global economy and expect to benefit from Barclays’s expertise in risk management, equities and acquisition advice.

Unlike Royal Bank of Scotland, HBOS and Lloyds TSB, Barclays has turned down government assistance to reach the new capital requirements because the money came with restrictions on bonuses, lending and dividend payments. The Barclays chief executive, John Varley, said that raising the capital itself would give Barclays more flexibility to benefit from opportunities that could arise because of the financial market downturn.

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