Investors in Barclays will meet today to approve a £7bn (€8.2bn) fund-raising which could put almost a third of the bank in the hands of Middle East investors.
Barclays has opted for the move instead of taking part in the British government’s £37bn (€43.6bn) recapitalisation scheme to inject taxpayer funds into HBOS, Lloyds TSB and Royal Bank of Scotland.
The bank has welcomed Manchester City owner Sheikh Mansour Bin Zayed Al Nahyan - a member of Abu Dhabi’s royal family – as an investor, and gained additional support from the Qatari Investment Authority and Challenger, which represents Qatar’s royal family.
But the fund-raising has not been without controversy as the bank’s institutional investors were initially excluded from plans to raise £3bn (€3.5bn) through the issue of reserve capital instruments (RCIs) to the Middle East investors.
Barclays will pay 14% a year on the RCIs in return for the capital, more expensive than the 12% coupon on the British government’s preference shares.
The higher cost angered investors, as well as the apparent breach of pre-emption rights – the principle that existing shareholders should be given the first chance to participate in fund-raising.
After fierce criticism, both the QIA and the Sheikh gave up £500m (€590m) of the RCIs between them to placate institutional investors, who snapped them up last week.
But the Association of British Insurers nonetheless slapped a “red top” rating on fund-raising plans as a signal of its grave concern “at the serious breach of the pre-emption principle”.
Barclays has been criticised for paying more to avoid government aid so it could continue to pay dividends as well prevent interference in its pay and bonus policies.
But the bank has said that executive directors will not receive any annual bonus, while all members of its board, including chief executive John Varley and investment banking boss Bob Diamond, are to be put up for re-election at its AGM next April.
Last week Royal Bank of Scotland shareholders overwhelmingly approved a £20bn (€23.6bn) bail-out plan for the company.
At a general meeting of the RBS Group in Edinburgh shareholders voted 99% in favour of the rescue plan, which will see the bank offer £15bn (€17.7bn) in new ordinary shares, with the British government promising to buy up any remaining.
Earlier in the week, Lloyds TSB shareholders voted 96% in favour of the bank’s controversial rescue takeover of ailing rival Halifax Bank of Scotland (HBOS).
They also backed plans to raise a total of £5.5bn (€6.5bn) through the issue of new shares and special preference shares to strengthen Lloyds’ balance sheet.
HBOS shareholders have been warned by their own chairman, Dennis Stevenson, of the risk of nationalisation if the takeover falls through.