Jeremy Warner: Abu Dhabi turns a fast buck on Barclays

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The Independent Online

Outlook I was a fierce critic of Barclays' decision last autumn to ignore shareholder pre-emption rights by bringing in Middle Eastern investors on favourable terms to provide new capital.

Yet I'm not going to say "I told you so" now that one of these investors has sold out, even though the decision to cash in at a big profit so soon after making the investment seems self-evidently to prove the point that pre-existing shareholders were short-changed.

There was little appetite for Barclays' paper back in the depths of the banking crisis last October. To the contrary, investors and analysts were reluctance to believe the bank's insistence that its balance sheet hadn't been as badly damaged by the crisis as others, and a real fear that like Royal Bank of Scotland, HBOS and Lloyds TSB, Barclays might end up effectively nationalised.

Barclays offered some £1.5bn of the mandatory loan notes now being sold to existing shareholders – albeit not on quite the same highly favourable terms as the Middle Eastern money was able to secure – but found takers for only £1.25bn of them. By contrast, the sovereign wealth funds of Abu Dhabi and Qatar took the risk, and are now reaping the rewards.

Barclays made much at the time of the supposed commercial benefits of bringing in such well-heeled strategic investors. They would prove rich in business opportunities, Barclays insisted. Even at the time this looked like no more than a fig leaf to justify the advantageous terms they had managed to secure, and now that Abu Dhabi has largely sold out, it is hard to imagine there will be any commercial benefits at all beyond mutual goodwill.

All the same, shareholders can hardly protest. Barclays shares may have bounced spectacularly in recent months, but for quite some time the Middle Eastern investors were way below water, and it was they who looked as if they had been sold a fast one. There has been plenty of opportunity to buy in on even more favourable terms since last October.

The decision to ignore pre-emption rights was taken in extreme circumstances when in the judgement of the Barclays board the overriding imperative was to avoid the pay and commercial constraints that taking UK Government money would have involved. It was a gutsy, high-risk call, which seems to have paid off. Barclays investors might have been a good deal worse off today had directors gone the other way and fallen back on the UK Treasury's tender mercies.

Even so, the speed with which Abu Dhabi has acted to offload the bulk of its interest is not exactly great news for Barclays, which remains one of the most thinly capitalised banks in Europe, and but for the disposal might itself have been looking to take advantage of the renewed strength in the share price over the months ahead to raise more money.

Abu Dhabi's disposal raises the question of whether other strategic investors might want to follow suit into taking profits.

The positive point to be drawn from yesterday's placing is that there seem to be buyers in quantity for Barclays stock at these prices, which is a very big change from the situation that ruled last October. Yet there must be limits, and the fact that there is already a perceived overhang in the stock will hinder attempts by Barclays to undertake any further recapitalisation.

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