Susan Thompson
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Barclays is on the verge of securing a capital injection of about £6.5 billion from investors including Qatar in what would be a coup for the bank, which has shunned the option of taking cash from the Government.
The Qatar Investment Authority (QIA), an existing shareholder, has been in negotiations for several weeks with Barclays. The bank also held talks with the Libyan Investment Authority and Russia’s VTB and Sberbank banking groups, although sources last night suggested that these discussions had not led to any investment.
Last night the parties were attempting to complete the deal. If things go according to plan, an announcement could be made as soon as today, although those involved said that talks may continue into next week.
The plan will help Barclays’s chief executive, John Varley, to recapitalise the bank without government help. Although the exact sum of the injection is not known, it is understood to be close to meeting Barclays’s promise to raise £6.5 billion in fresh capital.
The QIA already has a substantial stake in Barclays after taking part in the bank’s £4.5 billion capital increase earlier this year.
Barclays, along with Royal Bank of Scotland, Lloyds TSB and HBOS, was recently involved in talks with the Government over a multibillion-pound taxpayer bailout. However, while the other three institutions collectively accepted £37 billion of emergency funding in exchange for giving up significant stakes to the Government, Barclays decided to go it alone, announcing plans to raise £6.5 billion from investors to help to shore up its balance sheet.
Barclays is expected to issue a range of complex capital instruments to its new investors. It may also give existing shareholders the opportunity to participate in the fundraising. The bank has until the end of the year to raise its money or it will be forced to turn to the Government.
In February the QIA, a sovereign wealth fund set up to invest profits from the world’s largest gasfield, said it had $15 billion to spend on overseas financial institutions over the next two years. The £30 billion fund itself is expected to double in size by 2010. When QIA took its first stake in Barclays, in February, Mr Varley said: “The participation of players such as these is one of the most positive manifestations of globalisation. It’s highly positive that there are pools of money that can be put to work in this way. That’s very different to the world of five or ten years ago.”
Shares in Barclays closed up 14.95p at 205.25p yesterday.
Gordon Brown is to visit the UAE, Qatar and Saudi Arabia this weekend and is expected to urge the Gulf states to put more money into the International Monetary Fund (IMF). Mr Brown believes the IMF needs substantially more than the current $250 billion set aside for struggling nations.
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yields are down, so bond prices are up on their existing holdings, ALOT. Read some investing for dummies at least....
robert, NYC, US
How long will these overseas investors keep putting their money in till they decide enough is enough? The yield from U.S. Govt. Treasury and other bonds is down. Inflation and unemployment go up. What will we do when they say, enough of this?
T, Kansas City, US
So continues the decline of the West.
Elizabeth, Avalon, US
I wonder how much they really need?
Austin Tassletine, South West , UK
They don't want government intervention because that would mean regulation . Regulation mean's a cut in profits , so we can assume Barclays will not have the consumers interest's anywhere on it's to do list from here on in .
Time to close the account me-think's.
Nick , Sutton Coldfield, England
Institutional shareholders are invited to take part in the capital raising, not small shareholders. Given the huge discounts for the new shares, & the massive commissions being paid, small shareholders are paying a heavy price in dilution for the management's past errors. Power & wealth win again.
N Reed, London, UK
Can someone explain why this move has a positive effect on the share price when in effect the share capital has been diluted considerably?
Dan Barlow, Birmingham, UK
What Barclays don't mention is the extent to which they have written down the value of their sub prime exposure. It is widely known within the city that they haven't marked their exposure down by anywhere near the extent other major banks have & this could lead to further 'shock' writedowns.
AJ, London, UK
The decision by the board has one main reason, the same reason as always - pay and bonuses.
If they go with the government the Board pay is restricted on bonuses, this way they shaft their shareholders, but get to set their own exhorbitent bonuses!! It's all down to greed.
Andrew Johnson, Christchurch, UK
Barclays made a sensible choice to be free of UK govt control .
The correct deal is 4 the UK to buy shares, no strings, pay interest/divididend & guarantee & sell back into the market or the bank as soon as poss but no longer than ten years . Brown control freak shows thru and damages UK
Bill Hollis , maldon, uk
Oh, great. So now after exposing whats happening in Saudi funded UK mosques, the same people have a massive stake in one of the largest UK banks. The world is gong down the toilet.
Joe, Manchester,
This is severely diluting small shareholders in particular and less so institutional shareholders.
How can the directors get away with it?
A Government deal would be better for exisitng small shareholders than this - what's happened to pre-emptive rights?
David, London,
They would rather sell their souls to the devil than take government money that comes with so many strings attached you could start an orchestra... and their playing the funeral march!
Rex Lester, Surbiton, UK
What does this tell you about the Bank fear of letting this Government get a 'hold' on it (Barclays) - if their profits are slightly up in the present climate, this shows good judgement. Not letting this UK Government get a 'hold', also shows very good judgement
chris, Hitchin, UK
So Barclays is now in favour of nationalisation - just as long as it's a foreign government that owns it.
Stewart, Glasgow,
hang on...first the middle east is labelled a hotbed of terrorist activity and now suddenly they're all ok again? geez..what'll happen next? the uk will stop being a hotbed of institutionalized xenophobia?
mike clarke, stevenage,