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Keep hands off Barclays, Arabs warn Government
Robert Lea22.01.09
Barclays' new Middle Eastern masters have issued a “hands off” warning to any British Government plans to part-nationalise the High Street bank.
With shares in Barclays under severe pressure since Gordon Brown's second banking-industry bailout earlier this week, there has been increasing speculation the bank will have to be rescued and part-nationalised by the Government.
But Barclays' major investors, the Abu Dhabi royal family, have released the detail of documentation which reveals that if the UK Government were to make a move, it would trigger a clause which would not only deliver the bank into the hands of the Middle Easterners but also stipulates that the taxpayer would have to pay way over the current price for the new shares in the bank.
Last autumn, when the Government was taking equity stakes to rescue the Royal Bank of Scotland and the Lloyds TSB-HBOS banking combine, Barclays refused state help. Instead it went to an Abu Dhabi and Qatari consortium fronted by Sheikh Mansour bin Zayed Al Nahyan, the Abu Dhabi royal who is bankrolling Manchester City Football Club, and is advised by the British financier Amanda Staveley.
A total of £7 billion was injected into Barclays, giving Sheikh Mansour and his interests a 16.3% stake in the bank, with the interests of Qatari state investors' stakes amounting to 15.5%
Their interests are held in a mix of preference shares and convertible notes. However, a largely hitherto-overlooked clause in the agreement has now been spotlighted after the leaking of a letter that stressed the importance of the negotiated deal.
The letter referring to the clause negotiated by Staveley, who is said to have pocketed £40 million from brokering the deal, states: “If Barclays does have to issue new shares at a price which is, for example, half our agreed price, then you automatically get twice as many shares for the money you have already invested.
“If this provision comes into effect, you could potentially end up owning significantly more of Barclays at no extra cost.”
The documentation reveals that apart from triggering the free shares to the Middle East consortium, any new equity investment would have to be paid at 153p a share — that compares with the bombed-out Barclays share price of 63.8p, down 2.3p to yet a another new low on the day. The agreement runs until the end of June.
Sources indicate that the clause in such a deal is normal protection for the purchaser who would not want to see its stake diluted by a subsequent sale of equity to another party on more favourable terms.
Barclays' shares, like those of its rivals and the newly enlarged and renamed Lloyds Banking Group, have been battered since the turn of the year.
They have lost further ground this week because of the apparent market sentiment that investors expect them ultimately to fall into the hands of the state.
Barclays' shares are now trading at barely a third of where they were at the start of last week.
Reader views (19)
Another proof that shareholders didn't pay any attention for so many years. They were jsut happy that money was multiplying during the good times and ignored rationalism, ethics and morality or for that matter any pride. now is the time to pay price for your false comfort and arrogant capitalistic attitude.
- Kanan, mountain view
I Think day traders are making money now when Barclays PLC per share is $3. Barclays management team, UK government and Middle Eastern Royals are playing games when US investors are putting money to keep Barclays share alive. Anyway I think either way barclays share would be $8 in couple of months. Invest money on Barclays, its a good bank in UK, USA, Canada and all over the world.
- Shane, NYC USA
No proper international investing institution wants to have anyhting to do with the British bunglers. Look at what Crash Gordon has done to the pound - everyone is voting with their feet leaving...
- Jacqueline, Hampstead, London
UK bank ransom on its way?
Barclays directors know the extent of exposure to toxic debt
by selling to the arabs, then by pass 100 transparency
the doomsday scenirio of the bank haveing to be rcused by uk goventment or have a run on it by not haveing a rescue
and if 1 uk bank was to have a run, it would destroy confiedance
so maybe maybe, in the worst case scenioro, the uk would have to pay out double to the shareholders or have a real run on the banks..
i hope this decion is never made.
- Teka, london
and the story gets worse
- Jd, london
Is the sky about to collapse on Barclays? Barclays management have traded their souls on the open market in order to avoid having to go cap in hand to the government (who would then uncover & reveal to the Bristish public the extent of Barclays exposure to toxic assets) There must have been a reason why the shareholders were so opposed to the sellout.
What will become of Barclays shareholders when their shares are worth a pitance, the Government option passes them by, and the ME investors decide not to throw more good money after bad? Will the Northern Rock fiasco come round again?
- Chicken Little, London
Send Miliband!
- John Problem, Hackney Wick, London, UK
Long standing investors will be dismayed that such significant dilution rights were given away without an EGM. Surely Varley has to go.
- John Marlow, London, UK
Could you pay for the Olympics as well?, we'll let you have some free seats, actually you can have all of them!!!
- Dc, London
Alas, Lewis of London, even as you typed in your comments, the Co-op was being gobbled up by the Britannia Building Society... Where do you go to next...?
Remember, your only loyalty should be to your money. Your only motto should be "Secure Return OF Investement, Maximum Return ON Investement". It's the Bankers' motto - and should be ours too. So if the counter staff at Barclays give you good service, you're ahead.
There is absolutely no honour or personal loyalty in banking... only greed.... they'd drop you like a stone if they thought it necessary. Only the marketing says otherwise.
- Haskey, London
As a shareholder who has lost 80% of their value, I would prefer a ME investor to the hands of the UK Government. Remember, the horrendous interest rate and conditions applied to the first 'bailout' destroyed the share price of the banks forced to accept the government loans. HMG has now soften the terms of these loans realising how counter productive they were. No before forcing Barclay's to sell-out to overseas investors.
- Peter, London
These people are shrewd. They know a good bank when they see one.
- Dave Davies, Basingstoke
This news today basically rules out the possibility of Barclays being Nationalised. In the short term, if Barclays do need more capital Sheikh Mansour bin Zayed Al Nahyan and fellow investors will have to put more money in themselves or be obliged to make a bid for the company. On that basis I think that the current price is too low. Though that is a matter of opinion.
- Harry H, London UK
Since this 'poison pill' was agreed by Barclays management without shareholder approval, the UK Government should take a stance by not giving them any support via the taxpayer without a commeasurate stake in the business in return. Otherwise, let Barclays management return to their Middle Eastern masters and beg for more cash whilst customers should withdraw en masse
- John Bloomfield, Twickenham
It seems no one wants to have anything to do with the blundering UK state. Can anyone here blame them??
- Steveo, London
To those who sneer at the Arabs, let us not forget that they are great traders. Their forebears went as far as China with their camel trains to trade with the Chinese.
Today, they have proven their prowess again with the Barclays deal. Make no mistake, the UK is their new hunting ground. Good luck.
- V Tan, London
I bank with Barclays and have done since 1980. All my finances are tied up with them - mortgage, savings and current account. I was unhappy with this when it first happened and if the bank is taken over by the Gulf states then I will leave it. As a precaution back in October I opened a savings account with the Co Op and will take my business there even if the new mortgage is not on as good a rate. I suspect I wont be the only one.
- Lewis, London
this is what happens when we sell of everything British. We will lose everything before long.
- E Sullivan, London
Well done to the Abu Dhabi royals. Any chance of you buying a stake in the other British banks to keep them out of the grubby hands of our spendthrift leaders ?
- Doug Watt, london e14
