Gulf investors could buy-out Barclays

According to the Daily Telegraph today:

“The Government is in talks with Barclays after the bank admitted that raising extra capital could trigger a clause that would deliver control to its Middle East investors.

“Government insiders were last night reeling at the possibility that helping Barclays could see Britain’s fourth biggest lender automatically delivered to the Middle East as the result of a little known clause agreed in the bank’s October capital raising.

“Sheikh Mansour Bin Zayed Al Nahyan, a member of the Abu Dhabi royal family, and two Qatari investment vehicles invested £5.3bn in the bank in October. In return, they took a series of complicated investment structures, the bulk of which were “mandatory convertible notes”.

“Under the terms of the deal, the investors have to wait seven months for delivery of the shares, which convert at 153.276p. However, if at any time until June 30 Barclays raises more capital at a lower price, the Middle East investors are able to take their stake at that lower level.

“With Barclays’ shares now at 66.1p, the bank would have to roughly triple the number of shares issued to Sheikh Mansour and the Qataris. Such a move would hand the Arab investors around 55pc of Barclays, effectively giving them control. With the warrants for an additional £3bn of “reserve capital instruments”, their combined stake could rise to 67pc.”

My comment:

The negotiators of this deal seemed to have earned their fees. It was always going to be very risky investing in a UK bank in the middle of a global financial crisis, and the rewards had to be high.

To be fair, the Gulf investors will probably have to put even more capital into Barclays to keep the bank going but they are likely to prove very good long term shareholders, and probably more in tune with the bank’s agenda than the UK government which will be more worried about being re-elected than anything else.

Better to have bankers running a bank for their bonuses than politicians concerned about votes and their public image. But if Barclays falls to eastern promise then this will be a landmark day for the transfer of wealth from the west to the east.

Will the UK government allow this to happen? Previously unthinkable, with all the other problems on the government’s plate it just might. Barclays as a Gulf bank, why not?
Order my book online from this link