Mideast investors to put 7.3 billion pounds into Barclays

London: Investors from Qatar, Abu Dhabi and elsewhere are injecting 7.3 billion pounds (Dh44 billion) into Barclays Plc, saving it from having to accept a bailout from the British government.

Gulf News has confirmed a Reuters report that Shaikh Mansour Bin Zayed Al Nahyan, the UAE's Minister of Presidential Affairs, will own up to 16.3 per cent of the British bank as a result of the deal struck on Friday.

The fundraising is being made through a range of complex capital instruments, which could see Gulf investors owning about a third of the bank.

Britain's second biggest bank is raising up to 3.5 billion pounds from Shaikh Mansour.

Barclays is also raising up to 2 billion pounds from Qatar's sovereign wealth fund and 300 million from a member of Qatar's royal family. That could leave Qatar investors holding up to 15.5 percent.

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 Gulf and the bank expects to benefit commercially from the links as well as getting cash.

"There has been a significant shift in the availability of capital and economic power in the world over the last five years and we're ensuring we're aligned with those changes," said John Varley, Barclays chief executive.

Barclays shares initially jumped as investors welcomed the bank's ability to raise cash in tough markets and as it said group profit in the first nine months of this year was "slightly ahead" of the same level a year earlier.

It wrote down 129 million pounds on structured credit market assets for the
third quarter, but said 1 billion pounds of gains on debt it carries were reversed in October.

The bank is seeking to raise up to a further 1.5 billion pounds from the sale of mandatorily convertible notes with existing and other investors.

Asked on a conference call whether Barclays has enough capital to avoid more fundraising, Varley said: "Yes, we have what we need."

Barclays earlier this month turned down an offer of government funds under Britain's 400 billion bailout package and said it would raise capital privately.

Rivals Royal Bank of Scotland, Lloyds TSB and HBOS have agreed to take up to 37 billion pounds of taxpayers' funds to help rebuild balance sheets hit by the credit crisis and prepare for possible recession.

Barclays said when the government's recapitalisation plan was announced that it planned to raise about 6.5 billion pounds, with 3 billion from the sale of preference shares and the rest from selling ordinary shares. It had until the end of March to raise funds.

The bank expects to gain a competitive advantage by raising capital privately, while RBS and others will have the government as a major shareholder.

An issue of reserve capital instruments (RCIs) will pay annual interest of 14 per cent until June 2019. Warrants representing billions more pounds could also be issued.

Concern that the cost of the funding will be higher than capital available from the government and a sale of convertible shares in the market dragged Barclays shares lower after an initial jump, dealers said.

Barclays said the coupon on the RCIs is tax deductible and after tax it will cost approximately 10 per cent. After adding in the value of the warrants the cost should be similar to preference shares other banks are expected to issue, it said.