Barclays Raises $9 B

123jump.com Staff
25 Jun, 2008
New York City

Barclays will raise 4.5 billion in a offering that will have key investors with commitments. Sovereign funds of Qatar and Singapore along with China Development Bank and Sumitomo Mitsui Banking Corporation amon other institutional investors will invest up to 4 billion at a discount of 9.3%. The current and new shareholders will be able to invest at 4.7% discount. The stock rallied in New York and London trading.

[R]9:00AM New York - Barclays plc seeks to raise £4.5 billion in share issue and strengthen balance sheet.[/R]

Barclays plc is to raise £4.5 billion through a share issue and hope to strengthen its capital base, joining the growing list of British banks seeking shareholder support to raise extra liquidity.

The bank, which has denied for months it needed additional capital, will offer 1,576 million shares to existing shareholders and new investors, including the Qatar Investment Authority.

Most of the shares worth nearly £4 billion will be sold at 282 pence per share, a premium of 9.3% from its Tuesday closing price.

A placement of 169 million shares will raise the other £500 million at a price of 296 pence a share. All existing shareholders will have the opportunity to buy additional shares in the business, said Barclays

The Qatar Investment Authority, the government owned investment vehicle of the oil rich Qatar, will invest £1.7 billion in Barclays.

Barclays said a separate Qatari company called Challenger where Sheikh Hamad Bin Jassim Bin Jabr alThani, the Qatar premier owns controlling stake, agreed to buy new shares worth £533 million.

Sumitomo Mitsui Banking Corporation, the giant Japanese bank will invest £500 million while existing shareholders, including China Development Bank and Temasek, an investment firm from Singapore, will raise their equity holding.

China Development Bank will buy £136 million worth of shares, while Temasek will acquire £200 million.

Competitors, Royal Bank of Scotland Group has already raised about £12 billion while HBOS is looking to raise £4 billion and help ease the impact of the credit turmoil.

Morgan Stanley had also hoped the $5 billion sell of 9.9% of its shareholding to China Investment Corp at the peak of the credit crisis earlier this year would help it strengthen its capital base.

Share Issue to Raise Liquidity

Barclays hopes that the share issue will erase losses incurred from the credit market crisis and strengthen its balance sheet.

“Through our capital raising, we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification,” Barclays chief executive John Varley said.

On a pro-forma basis, Barclays estimates that it would have reported a tier one ratio of 8.8% and an equity tier one ratio of 6.3% as at 31 December 2007, taking into account the latest fundraising. This is better than its targets of 7.25% and 5.25% respectively.

Barclays has incurred losses from mortgage backed investments, devalued by the slump in the US housing market. The bank has written off about £2.6 billion since the start of the credit crisis. The on-going credit market crisis has cost global financial institutions more than $400 billion to date and estimates of total losses are running in excess of $1.2 trillion.

The bank said in a recent trade update that profits in May exceeded that of 2007. It said its global retail and commercial banking businesses delivered strong growth in profits, while its investment banking and investment management profit was ""in line"" with the year-earlier results.

Shares of Barclays rose 5.4% or 16.75 pence to 327.50 pence at close in London trading Wednesday and in New York trading its ADR rose $1.00 to $25.50.