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Barclays plans £4.5bn fundraising Barclays plans £4.5bn fundraising
(about 3 hours later)
Barclays has said it is planning to raise £4.5bn ($8.8bn) in a share issue to bolster its balance sheet.Barclays has said it is planning to raise £4.5bn ($8.8bn) in a share issue to bolster its balance sheet.
The firm is to sell shares to new investors, such as the Qatar Investment Authority, and existing shareholders including China Development Bank.The firm is to sell shares to new investors, such as the Qatar Investment Authority, and existing shareholders including China Development Bank.
Barclays said the fundraising move would "strengthen its capital base".Barclays said the fundraising move would "strengthen its capital base".
It is the latest British bank, following the Royal Bank of Scotland and HBOS, to seek to raise money to ease the impact of the credit crunch.It is the latest British bank, following the Royal Bank of Scotland and HBOS, to seek to raise money to ease the impact of the credit crunch.
Barclays shares rose more than 5% in early trading in reaction to the fundraising move. Barclays shares rose more than 6% on Wednesday in reaction to the fundraising move.
New investorsNew investors
The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in Barclays, giving it a 7.7% share in the business.The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in Barclays, giving it a 7.7% share in the business.
We strengthen our capital base and give ourselves additional resources to pursue our strategy of growth John Varley, Barclays chief executive See Barclays sharesSee shares in the banking sectorWe strengthen our capital base and give ourselves additional resources to pursue our strategy of growth John Varley, Barclays chief executive See Barclays sharesSee shares in the banking sector
A separate Qatari company called Challenger - controlled by Sheikh Hamad Bin Jassim Bin Jabr al-Thani - is to invest £533m in the business.A separate Qatari company called Challenger - controlled by Sheikh Hamad Bin Jassim Bin Jabr al-Thani - is to invest £533m in the business.
Japanese bank Sumitomo Mitsui Corporation, meanwhile, has agreed to buy £500m in new shares.Japanese bank Sumitomo Mitsui Corporation, meanwhile, has agreed to buy £500m in new shares.
The share issue will see existing investors, including China Development Bank and Singaporean investment firm Temasek, top up their holdings.The share issue will see existing investors, including China Development Bank and Singaporean investment firm Temasek, top up their holdings.
The former will buy £136m worth of shares, while the latter will acquire £200m.The former will buy £136m worth of shares, while the latter will acquire £200m.
Barclays has suffered losses from mortgage-backed investments, devalued by the slump in the US housing market, but not on the same scale as many top US and European firms.Barclays has suffered losses from mortgage-backed investments, devalued by the slump in the US housing market, but not on the same scale as many top US and European firms.
It recently gave an upbeat trading report, saying profits in May were well ahead of 2007.It recently gave an upbeat trading report, saying profits in May were well ahead of 2007.
Even today the bank is still sending out confusing and apparently contradictory messages Read Robert Peston's thoughtsEven today the bank is still sending out confusing and apparently contradictory messages Read Robert Peston's thoughts
"Through our capital raising, we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification," said chief executive John Varley."Through our capital raising, we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification," said chief executive John Varley.
"We draw strength from the continued resilience of our trading performance.""We draw strength from the continued resilience of our trading performance."
But given Barclays' positive comments on its position and the state of its capital ratios - a key indicator of balance sheet strength - BBC business editor Robert Peston said it was not entirely clear why it felt the need to raise the cash.But given Barclays' positive comments on its position and the state of its capital ratios - a key indicator of balance sheet strength - BBC business editor Robert Peston said it was not entirely clear why it felt the need to raise the cash.
He added that Barclays would be conscious of pressure from the Financial Services Authority on all UK banks to have sufficient capital in reserve for future eventualities.He added that Barclays would be conscious of pressure from the Financial Services Authority on all UK banks to have sufficient capital in reserve for future eventualities.
Discount priceDiscount price
Under the terms of the share issue, all existing investors will have the opportunity to buy additional shares in the business.Under the terms of the share issue, all existing investors will have the opportunity to buy additional shares in the business.
Their ultimate take-up will influence the amount of shares held by leading foreign investors.Their ultimate take-up will influence the amount of shares held by leading foreign investors.
MAJOR FOREIGN INVESTORS Qatari Investment Authority: 7.7%Challenger: 2.3%Sumitomo: 2.1%China Development Bank: 3.1%Temasek: 2.9%Provisional figures dependent on take-up of shares by other existing investorsMAJOR FOREIGN INVESTORS Qatari Investment Authority: 7.7%Challenger: 2.3%Sumitomo: 2.1%China Development Bank: 3.1%Temasek: 2.9%Provisional figures dependent on take-up of shares by other existing investors
But with the commitments announced on Wednesday, Challenger would own 2.3% of Barclays' total equity while Sumitomo would own 2.1%.But with the commitments announced on Wednesday, Challenger would own 2.3% of Barclays' total equity while Sumitomo would own 2.1%.
China Development Bank and Temasek would boost their current shareholdings to 3.1% and 2.9% respectively.China Development Bank and Temasek would boost their current shareholdings to 3.1% and 2.9% respectively.
The bulk of the new shares, worth £4bn, are being sold for 282 pence each, representing a 9% discount on their value at close of trading on Tuesday.The bulk of the new shares, worth £4bn, are being sold for 282 pence each, representing a 9% discount on their value at close of trading on Tuesday.
British banks are tapping their shareholders for extra cash to shore up their financial position as credit markets remain unstable and earnings from key activities - particularly mortgage lending and investment banking - come under real strain.British banks are tapping their shareholders for extra cash to shore up their financial position as credit markets remain unstable and earnings from key activities - particularly mortgage lending and investment banking - come under real strain.
RBS Group has already raised about £12bn while HBOS is looking to raise £4bn.RBS Group has already raised about £12bn while HBOS is looking to raise £4bn.
Barclays led the way in courting foreign investors when it sold a stake in its business to China Development Bank last year.Barclays led the way in courting foreign investors when it sold a stake in its business to China Development Bank last year.
The Qatari Investment Authority already has significant interests in the UK, in effect controlling about 25% of shares in supermarket chain Sainsbury's.The Qatari Investment Authority already has significant interests in the UK, in effect controlling about 25% of shares in supermarket chain Sainsbury's.