Barclays to raise $8.9 billion, mostly from overseasBy David...

Barclays to raise $8.9 billion, mostly from overseas
By David Jolly
Published: June 25, 2008

PARIS: Barclays, the venerable British bank, on Wednesday joined its peers, Royal Bank of Scotland and HBOS, in seeking new funds after it wrote down £1.7 billion in bad loans this year.

The bank said it would raise £4.5 billion, or about $8.9 billion, through the issue of new shares. It said in a statement that it would raise the new capital by selling new shares to investors including the Qatar Investment Authority, Challenger and Sumitomo Mitsui Banking, as well as China Development Bank and Temasek Holdings, the Singapore government fund.

Existing shareholders will also be allowed to buy the shares, it said.

Barclays is the latest global bank to go hat in hand to investors to make up its losses since the global credit crisis began last year with the collapse of U.S. subprime mortgage market. Banks have announced losses totaling nearly $400 billion, and the International Monetary Fund has estimated that the total figure could reach nearly $1 trillion. Financial institutions have raised about $300 billion over that time.

The news had been expected for some time, and Barclays shares rose 10.75 pence, or 3.5 percent, to 321.5 pence in early London trading.
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Barclays, which was established more than 300 years ago, said that the share issue would enable it to raise its tier-one capital ratio above its 7.25 percent target. It estimated that, after taking the share issue into account, its "pro forma," tier-one capital ratio would have been 8.8 percent on Dec. 31, according to the Basel II formula. The equity tier-one ratio would have been 6.3 percent, above its target of 5.25 percent, it said.

John Varley, the Barclays chief executive, said in a conference call that the new funds would strengthen the bank's capital base and give it resources to pursue growth. He said about half the funds would used to raise the bank's capital position, while the remainder would go to funding new growth.

He also said Barclays business remained strong in May, and said the bank's dividend policy remained unchanged.

Barclays said it would raise £4.0 billion by selling 1.4 billion new shares at 282 pence each, a discount of 9.3 percent to the Tuesday closing price.

The Qatar Investment Authority and Challenger, a company representing the Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, the chairman of Qatar Holding, and his family, have agreed to invest up to £1.76 billion and £533 million, respectively.

Existing shareholders are entitled to buy three shares for every 14 shares they hold.

It said Sumitomo Mitsui would buy the remaining £500 million, taking 169 million new shares at 296 pence each, a a discount of 4.7 percent to its closing price Tuesday.

China Development Bank has agreed to invest up to £136 million, while Temasek has agreed to invest up to £200 million. Their participation ensure that they will remain among the bank's biggest shareholders, it said.