Qatar set to take 6% stake in Barclays after retail investors shun fundraising
Saturday, 19 July 2008
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Barclays could sell only 19 per cent of its £4bn share issue to its existing investors and take-up of HBOS's £4bn is set to be much lower.
With shareholders shunning Barclays' capital raising amid fears about the banking sector, the Qatar Investment Authority will now be the bank's biggest shareholder with a stake of about 6 per cent after committing to buying the bulk of any shares left over from the offer. Barclays' offer closed on Thursday morning, too late to benefit from a change of heart among investors that sent the bank's shares above the 282p offer price.
Shares left from HBOS's fully underwritten cash call will be left with Morgan Stanley, Dresdner Kleinwort and sub-underwriting investors lined up by the investment banks to take a substantial slug of the unsold stock.
HBOS will announce the results of the rights issue, which closed yesterday, on Monday. Take-up is likely to come in substantially below that of Barclays' offer because HBOS has 2.1 million small investors holding 26 per cent of the stock, few of whom will have taken up their rights with the shares below the offer price.
HBOS's shares rose to 282p, above the 275p offer price, shortly after yesterday's 11am deadline for taking up the rights in its cash call. The bank's advisers will hope that optimism about the financial sector persists. But the knowledge that the shares are going to come on to the market could cause an overhang on HBOS's stock, putting renewed pressure on the share price. It is unusual for a rights issue to fail but HBOS has been buffeted by a financial crisis that has caused panic about banking stocks. If most of the shares end up with the underwriters, it will be the biggest offering to fail since the stock market crash of October 1987, which left investment banks holding most of BP's £7bn share sale. HBOS declined to comment.
Analysts predicted that after HBOS's troubles and the chaos of Bradford & Bingley's £400m rights offering, banks will use dividend cuts and asset disposals to raise fresh equity if necessary. Fears persist that more capital will be needed if further writedowns from the credit fallout are combined with rising bad debts caused by the economic slowdown. B&B's rights issue was given the go-ahead by shareholders on Thursday. The buy-to-let lender was the only bank whose shares fell yesterday, dropping 3.7 per cent, after it reported a sharp rise in mortgage arrears. Home loans three months overdue jumped to 2.0 per cent of those under its covered bond programme in July from 1.78 per cent in June, the bank revealed.
Barclays side-stepped the drawn-out rights process by lining up Qatar and other investors in advance to buy the shares that existing investors did not want. The bank now has an array of overseas investors, including Challenger Trust, a Qatari fund, with about 2 per cent and Japan's Sumitomo Mitsui Financial Group, which will own 2.1 per cent after buying a £500m stake. China Development Bank and Temasek of Singapore, which had already taken stakes in Barclays, will own about 3 per cent and 2.5 per cent respectively.
The bank's shares rose 10.2 per cent yesterday to 320.25p as Citigroup's better-than-expected results in the US added to hopes that the worst of the credit turmoil could be over.
John Varley, Barclays' chief executive, said: "I'm pleased to welcome new shareholders to our register as a result of our capital raising. We appreciate the support of existing owners of our shares." Other institutional shareholders also took up shares as part of an agreement before the offer.
