The Barclays capital raisings of 2008 remain shrouded in
mystery and intrigue, and are the subject of investigation by
both the UK’s
Serious Fraud Office (SFO)
and the US Department of Justice.
The investigation of the UK's SFO into the Barclays-Qatar
capital raising in 2008 has reportedly stepped up a
notch. Bob Diamond, John Varley, Chris
Lucas and other senior management at Barclays at the
time of the event are set to be questioned under
caution, according to the Financial
Below is a review of the events that led to this point in
Barclays sought to raise capital privately, avoiding
direct equity investment from the UK government, which was
offered to boost its capital ratio. Barclays believed that "
maintaining its independence from government was in the best
interests of its shareholders".
Barclays attempted to raise £4.5 billion through
a non-traditional rights issue;
existing shareholders had the opportunity to buy
shares. Only 19% of the offered shares were purchased.
The remaining shares were allocated to investors, including
Sumitomo Mitsui Banking Corporation, China Development Bank,
Qatar Investment Authority and Challenger, an organization
representing Qatari prime minister Sheikh Hamad bin Jassim bin
On September 17, Barclays announced its agreement to
purchase Lehman Brothers' investment banking and trading
divisions. On September 18, it successfully placed 226 million
shares, raising approximately £700 million to give
Barclays the capital necessary for the Lehman acquisition.
Barclays launched a
further round of capital raising, approved by special
resolution on November 24, as part of its overall plan to
achieve higher capital targets set by the FSA to ensure it
would remain independent, and
raised £7 billion from investors from Abu
Dhabi and Qatar.
Qatar Holding's stake in Barclays rose to 12.7%. Sheikh
Mansour Bin Zayed Al Nahyan, chairman of
the International Petroleum Investment Company
(IPIC), invested up to £4.75 billion in instruments
that could give him a 16% stake.
Goldman acted as an adviser to Sheikh Mansour.
was initially claimed Sheikh Mansour's stake was a personal
investment but Barclays later cited "a drafting error" in
documents and explained that the securities were, in fact, held
by state-owned IPIC.
Existing Barclays shareholders complained they were not
offered full pre-emption rights in this round of capital
raising, even threatening to revolt at the extraordinary
meeting. Sheikh Mansour and Qatar Holding agreed to open up
£500 million of their new holdings of reserve capital
instruments for clawback. Existing investors, their confidence
in Barclays boosted by the Middle Eastern money,
now took this up.
IPIC sold 1.3 billion Barclays shares (half its
investment), netting profits of £1.5 billion. Barclays
share price fell 14%.
Qatar Holding sold a 3.5% stake worth £1.4 billion
on October 20. Barclays’ share price was down
20% in the month following Qatar Holding's
sale. Qatar Holding still remained one of the
bank’s largest shareholders, (even after a
further sale of warrants worth around £750 million in
Barclays revealed that
the FSA was investigating whether the bank adequately
disclosed fees paid to Qatar Investment Authority.
Serious Fraud Office announced an investigation
into the Middle East capital raising over "payments under
certain commercial agreements" between the bank and Qatar
Holding LLC, part of the Qatari sovereign wealth fund, the
Qatar Investment Authority.
Barclays announced that the "commissions, fees and expenses" for the
October/November 2008 capital raising amounted to £300
million, payable primarily to Qatar Holding (£66
million), Challenger and HH Sheikh Mansour bin Zayed Al
FSA announced an expansion of the investigation into the
Barclays-Qatar deal, focusing on the disclosure surrounding the
ownership of the securities in the bank.
The results of a near two-year investigation by Euromoney
Abu Dhabi investment in Barclays in October/November
published this month
Our story answers a number of questions
about what happened to £110 million ($170 million)
in fees paid by Barclays ostensibly to Sheikh Mansour for his
£3.5 billion investment.
It is a remarkable story of one of the most important
transactions of the financial crisis, which helped Barclays
avoid the need for a bailout from the UK
But it still only tells some of the story.