BARCLAYS, BRITAIN'S second-biggest bank, moved to try to head off shareholders' fury at its proposals to raise £7 billion (€8.2 billion) in fresh capital from Persian Gulf sovereign funds by announcing yesterday some limited concessions to allow existing investors some access to the offering.
The bank has put its board up for re-election and Barclays executive directors agreed to waive bonuses, the London-based bank said. The impact of the latter concession was limited because the bonus is performance-related.
But the bank's partial retreat failed to quell investor anger as the concessions still shut existing shareholders out of the part of the capital-raising plans which most diluted existing holdings.
The bank was forced to act after leading shareholders' threatened to oppose the capital raising in a vote next week. Barclays last month turned down the UK government bailout in favour of a very expensive capital injection from Qatar Holding and Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi's royal family. The offer would leave the two with a 31 per cent stake between them.
Investors, including Legal General Investment Management with about 5 per cent of Barclays' shares, and Aviva Investors with 1 per cent, said the way the deal had been done made a mockery of shareholders' pre-emption rights designed to protect their holdings from being diluted.
The stock fell as much 10 per cent yesterday in London trading.
Barclays said it would offer £500 million of the issue to existing UK shareholders in the hope of assuaging their fury. The bank is expected to win the capital raising vote on November 24th.
"Shareholders have been left with little choice but to vote in favour of current proposals," said James Eden, a London- based analyst at Exane BNP Paribas, who has an "underperform" rating on the stock. "If they vote with their heart and kill off the entire capital raising, then Barclays will be forced to go crawling back to the UK government," Mr Eden said in an e-mailed note to clients.
Some investors said the bank was still acting against their interests since they were not being given the chance to claw back any of the highly-dilutive five-year warrants offered to the Middle Eastern investors.
The Association of British Insurers, whose members account for 20 per cent of investments in the London stock market, gave Barclays's latest plan a "red top" rating, its lowest grade, to reflect "grave concern".
The preferential terms offered to the Persian Gulf funds and exclusion of most investors is a "serious breach", it said.
"Shareholders will have to weigh up all relevant factors, including the consequences of rejection for Barclays and the wider banking system."
Barclays has said the capital raising will dilute the bank's earning per share by 30 per cent.
"The discussions have been constructive and the board of Barclays has listened carefully to shareholders' views," the bank said. - (Financial Times service, Bloomberg)
