Barclays to raise funds to avoid bailout

By Ben Livesey and Jon Menon  |   2008-11-1  |     NEWSPAPER EDITION

BARCLAYS Plc, the United Kingdom's second-biggest bank, will raise 7.3 billion pounds (US$11.8 billion) from a group that includes investors in Abu Dhabi and Qatar as credit-market writedowns deplete capital, it said yesterday.

Chief Executive Officer John Varley tapped sovereign wealth funds in the Mideast to avoid a UK government bailout plan that calls for overhauling management boards, capping executive salaries and banning dividend payouts. Barclays fell as much as 11 percent in London trading yesterday.

Barclays will sell 5.8 billion pounds of convertible notes and preferred shares that pay as much as 14 percent annual interest through 2019 to the Mideast investors, the London-based company said in a statement.

The bank also plans to sell as much as 1.5 billion pounds of securities to new and existing shareholders in a share offering that closed yesterday.

"The good news is they have managed to raise the money and have avoided going cap in hand to the government or pursuing a heavily discounted rights issue," said Alan Beaney, head of investments at Principal Investment Management in Leeds, England who manages US$2 billion including Barclays' shares. "On the other hand, instead of being diluted by the UK government, shareholders are being diluted by sovereign wealth funds."

Barclays, down 10 percent at 184 pence as of 10:30am in London, has lost 62 percent of market value this year. Only HBOS Plc and Royal Bank of Scotland Group Plc have fallen more among the UK's biggest banks, and both companies have ousted their CEOs after being forced to participate in the government-assisted program, Bloomberg News said.

"It is important to ensure self determination and our destiny," Barclays Chairman Marcus Agius told analysts on a conference call yesterday. "We are satisfied we will," he said.

Barclay has until the end of the year to meet new capital needs to prevent credit writedowns, a loss of confidence and a recession from destroying the country's banks.