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Posted by Monitor on June 25, 2008, 4:13 am
Barclays Announces GBP 4.5 Billion Share Issue
By Steve McGrath and Vladimir Guevarra
Of DOW JONES NEWSWIRES
Published: June 25, 2008 04:05 ET (08:05 GMT)
LONDON (Dow Jones)--Barclays PLC (BCS) Wednesday became the latest
British bank to unveil a share issue to shore up its balance sheet,
announcing participation by several Asian and Middle East sovereign
wealth funds.
The bank said it will look to raise about GBP4.5 billion.
Of that amount, around GBP4 billion will come from the placing and
open offer of 1.407 billion new shares at 282 pence per share, a
discount of 9.3% to Barclays' closing price of 311 pence on Tuesday.
Another GBP500 million will be raised by placing 169 million new
shares at 296 pence a share.
Barclays said the offer will be available for clawback in full by
existing shareholders, who are being offered the opportunity to
subscribe on the basis of three open-offer shares for every 14
existing ordinary shares.
Merrill Lynch said "the issue will strengthen Barclays' capital base
and provide resources to fund future growth." Merrill has a target
price of 364 pence on the stock.
A trader said the news is "a welcome development." Share issue aside,
the trader said Barclays' trading remains resilient with profit in May
well ahead of the monthly run rate last year.
Still, Lehman Brothers said Barclays' shares "are likely to remain out
of favor in an unattractive sector."
Barclays said the Qatar Investment Authority and another Qatar
government holding company, Challenger, had agreed to invest up to
GBP1.76 billion and EUR533 million, respectively.
Japan's Sumitomo Mitsui Banking Corp. (SMFJY) has agreed to invest
about GBP500 million, China Development Bank (2883.TW) up to GBP136
million and Singapore's Temasek up to GBP200 million.
It added that other investors and institutional shareholders had
already agreed to invest up to GBP1.336 billion through the issue.
Barclays' share issue follows rights issues by Royal Bank of Scotland
Group PLC (RBS), HBOS PLC (HBOS.LN) and Bradford & Bingley PLC
(BB.LN). The British banks have seen their balance sheets deteriorate
due to write-offs they made related to the credit crunch and subprime
loans.
"Through our capital raising ... we strengthen our capital base and
give ourselves additional resources to pursue our strategy of growth
through earnings diversification. We position ourselves to capture
opportunities for new business at attractive margins in our retail and
commercial banking businesses and in investment banking and investment
management," Barclays Chief Executive John Varley said.
It has been speculated for several months that Barclays was seeking
funding from sovereign wealth funds.
The bank said the share issue will allow it to raise its capital
ratios, ahead of its 7.25% Tier 1 and 5.25% equity Tier 1 target
ratios.
On a pro forma basis, the bank estimates that the share issue would
have allowed it to report a Tier 1 ratio of 8.8% and an equity Tier 1
ratio of 6.3% at the end of last year.
At 0851 GMT, the bank's shares were up 13 pence, or 4.1% at 323 pence,
outperforming the FTSE 350 Banks index, which was up 1%.
Company Web site: www.barclays.com
Dow Jones Newswires
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