Published November 19, 2008

Barclays shareholders get slice of &pound5.8b capital injection

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(LONDON) British bank Barclays moved to head off a shareholder revolt yesterday by offering them a slice of a &pound5.8 billion (S$13.1 billion) capital injection from Middle East investors and scrapping 2008 executive bonuses.

Shareholders will be offered &pound500 million of reserve capital instruments (RCIs) previously earmarked for investors in Qatar and Abu Dhabi under its controversial capital plan. Many investors had said the RCIs offered too generous terms to the Middle East investors.

Barclays said its entire board will also stand for re-election in April, confirming a Reuters report on Monday.

Britain's second biggest bank said the move followed meetings between executives and investors.

Qatar's sovereign wealth fund and Sheikh Mansour Bin Zayed Al Nahyan, a brother of Abu Dhabi's ruler, will each make up to &pound250 million of RCIs available to existing shareholders in a bookbuilding process yesterday, the bank said.

'This represents a small, albeit non-equity, olive branch to existing institutional investors,' said James Hutson, analyst at Keefe, Bruyette & Woods.

Analysts said the concessions increased the prospect that shareholders will approve Barclays' plan at a vote next Monday, but would not change much for investors. Middle East investors will still get all the warrants on the RCIs and commission on the deal, and there would be little change to investor dilution.

Mr Hutson said perhaps more positive was the move by directors to waive their 2008 bonuses.

Barclays follows US investment bank Goldman Sachs and Swiss bank UBS this week in scrapping all bonuses for executives this year. Barclays CEO John Varley, investment banking chief Robert Diamond, consumer bank head Frits Seegers and finance director Chris Lucas will forgo their 2008 bonuses, the bank said. Mr Diamond, the bank's top-paid director, got a &pound6.5 million bonus last year as well as his &pound250,000 base salary.

Barclays, which has opted to raise fresh capital from private investors rather than subscribe to a government bailout of Britain's banks, is planning to raise &pound7 billion in total.

Existing shareholders were angered that &pound3 billion of that was from RCIs only offered to the Qatar and Abu Dhabi investors, offering an attractive 14 per cent annual interest.

The bank is raising funds privately rather than take cash from the UK government, unlike its rivals Royal Bank of Scotland, Lloyds TSB and HBOS. -- Reuters