Barclays could raise 7 bln
LONDON, June 17 (Reuters) – British bank Barclays could raise up to 7 billion pounds ($13.8 billion) from a fundraising structure outlined this week to repair its stretched balance sheet.
Barclays said in a brief statement on Monday it was considering issuing new shares by way of a placing and a pre-emptive offer to existing shareholders.
Under such a structure, Barclays would be allowed to issue new shares up to one-third of its existing total without needing to call an extraordinary general meeting.
It would have to issue a prospectus and go through due diligence, and the shares could be issued at a discount of up to 10 percent.
The bank is expected to attempt to raise about 4 billion pounds from sovereign wealth funds in a deal which could come this week. Existing shareholders would get the chance to buy shares on the same terms to maintain their holdings, which would trim the amount taken by sovereign funds.
By 1050 GMT Barclays shares were up 6.3 percent at 350 pence, the top gainer in the FTSE 100 index, extending a 3 percent rise on Monday to value the bank at 22 billion pounds.
The shares hit a 10-year low last week of 293p and are still down by a quarter in the last seven weeks, hit by concern about the bank’s capital position and slowing UK housing and capital markets.
“The market is pretty relieved that they have the confidence they can get this away,” said Colin Morton, fund manager at Rensburg Fund Management and a holder of Barclays stock.
“The market has known they would have to raise some cash, and the fact they’ve confirmed it and said profits are holding up pretty well have conspired to give it a mini-rally,” he said.
Investors reacted positively to the plans as it should see the share price affected less than under a heavily discounted rights issue, remove the threat that unwanted stock is placed in the market, and rebuild the bank’s capital back to near industry average levels.
Morton and other shareholders said more details were needed before committing to support the issue.
The proposed structure would also enable Barclays to sidestep the volatile share trading seen during Royal Bank of Scotland’s recent record rights issue and in the run-up to cash calls by HBOS and Bradford & Bingley.
Raising 4 billion pounds would lift Barclays’ core Tier 1 capital ratio to near 6 percent if there were no more big writedowns, analysts estimate. That is regarded as a comfortable level for banks in current turbulent conditions.
Other UK bank stocks also rose strongly on Tuesday, with HBOS and RBS both up over 4 percent.
James Invine, analyst at Dresdner, upgraded his rating on Barclays to “hold” and RBS to “add”, saying he was turning more positive on selected UK banks after recent underperformance.