When, in my article of 31st October 2008, I spoke about Barclays Bank’s move to raise capital of £7.3 billion from the Middle East rather than follow the debt ridden crowd seeking government handouts, I don’t think many people (me included!) realised that, by taking that Middle Eastern capital, it would effectively prevent them from seeking government aid in the short term.
Apparently the investors were advised by PCP Capital, and PCP Chief Executive Amanda Staveley was concerned about the instability in the financial sector and that Barclays still might need a government bailout in the not too distant future. On her advice a clause was inserted in the agreement to protect the interests of the potential investors, and what an amazing piece of advice!
The clause states basically that, if Barclays raise fresh capital before the end of June 2009, the investors would receive a greater number of shares without having to pay any more for them. As Amanda Staveley puts it, ‘If Barclays does have to issue new shares at a price which is, for example, half our agreed price, then you will automatically get twice as many ordinary shares for the money you have already invested.’ What a masterstroke! Any capital raised will automatically increase their stake and, if the government were to inject enough capital, it could even give full control of the bank to these middle eastern investors!
The only way round this would be for the government to pay more than the 153p a share paid by the Abu Dhabi/Quatar syndicate but, as Barclays shares are only around 66p a share at the moment, it is extremely unlikely to happen!
So, there you have it. If you want debt advice visit Hamilton Locke, Chiltern or The Debt People – but if you want advice on buying up chunks of banks visit Amanda Staveley!