Late rally leaves Qataris with £200m profit from Barclays share-placing
Posted by admin on 20 July, 2008 under Business news | 
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Investors based in Qatar own 8% of Barclays after the bank’s existing shareholders shunned its £4.5bn fundraising.
The Qataris were sitting last night on a £200m profit after bank shares staged a sudden rally after a week in which shares were battered by fears over the state of the US banking sector.
However, the rally came too late to help HBOS, which completed its £4bn rights issue yesterday. The bank will reveal on Monday how many of its shareholders supported its cash call at 275p a share. The City is braced for a low uptake, suggesting that the investment banks Morgan Stanley and Dresdner Kleinwort and the sub-underwriters they lined up could be left holding many of the £4bn of new shares.
Just 19% of Barclays’ shareholders participated in its fundraising. In contrast, the record-breaking £12bn rights issue by Royal Bank of Scotland was supported by 97% of its existing shareholders. HBOS is not expected to achieve anything near this level of success, particularly as 25% of its investor base are retail investors who traditionally sit on the sidelines during fundraising exercises.
Barclays avoided a rights issue. Instead it embarked upon a £4bn share-placing backed by four major investment houses – the Qatar Investment Authority and the Qatar-based fund Challenger, China Development Bank and Singapore’s sovereign wealth fund Temasek – and a £500m investment by the Japanese bank Sumitomo Mitsui.
Barclays’ existing shareholders were allowed to “claw back” stakes from the four investment houses but had little incentive to do so because its shares often traded below the 282p at which the placing was priced.
However, by the close last night, Barclays shares were up 10% at 320.25p and HBOS closed above its rights issue price of 275p at 282p, up 5%. At the 11am deadline for acceptances for the rights issue, HBOS shares were at 269p, below the subscription price.
Bank shares were buoyed yesterday by better than expected figures from the US bank Citigroup after a turbulent week following the bailout of the US mortgage lenders Freddie Mac and Fannie Mae. RBS, which sank to a new low of 145p this week, also jumped 10% to 197.6p – within a whisker of the 200p at which its investors were convinced to support its cash call.
Sentiment was also boosted by research from analysts at Morgan Stanley who regard 145p as the “bottom”. James Eden, banks analyst at Exane BNP Paribas, also called the bottom for RBS. “We see downside risk for every single bank apart from RBS,” said Eden.
He also admitted he was embarking upon a more pessimistic way to value banks by using the basis of a 1990s-style recession and then giving this scenario a 40% probability. To explain his change in methodology, he said: “As this author sits here today, watching his house plunge in value while the cost of his weekly food shop soars, booking advance supersaver train tickets to visit his grandparents in Cambridge because petrol is too expensive to travel by car, and with a greater sense of job insecurity than he would like, we are forced to admit that our base-case scenario is probably also our best case”.
Barclays shareholder register will undergo a radical change as a result of its fundraising. The QIA is expected to announce next week that it has a 6% share in the bank, while Challenger is expected to have a near-2% investment, taking the total Qatari investor base to 8%. The China Development Bank is maintaining its stake at 3%, while Temasek is raising its stake from 2% to about 3%. Sumitomo Mitsui will own 2.1%, while a variety of hedge funds such as Och-Ziff, Lansdowne and GLG will also be taking up Barclays shares.
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