Barclays announces capital raising

The capital raising, which is subject to approval by Barclays shareholders, will be effected through an issue of £3bn of Reserve Capital Instruments, with an associated issue of warrants, and an issue of up to £4.3bn of Mandatorily Convertible Notes.

As a result of the Capital Raising, Barclays expects to fully satisfy its commitment, as announced to the market on 13th October 2008, to raise new external capital as part of its overall plan to achieve the new higher capital targets set by the UK Financial Services Authority for all UK banks.

The Capital Raising will:
• enable Barclays simultaneously to achieve its tier one and equity capital issuance commitments to the FSA with certainty and ahead of the previously announced timetable;
• strengthen links with existing large shareholders and introduce a substantial new investor to Barclays; and
• provide the opportunity for existing institutional shareholders to participate in the Capital.

Raising by subscribing for Mandatorily Convertible Notes. The Board estimates that, taking into account the proceeds of the Capital Raising, on a proforma basis (assuming issue and conversion of £4.3bn of Mandatorily Convertible Notes).

Barclays would have reported a tier one ratio of 11.3% and an equity tier one ratio of 7.6% as at 30th June 2008. This excludes the impact of any future exercise of the Warrants.

Barclays has also today released its Interim Management Statement stating that Group profit before tax for the nine months ended 30th September 2008 was slightly ahead of 2007.

Income growth was strong, and costs grew broadly in line with the rate of income growth.

Impairment charges grew at a similar rate to the first half of the year. Third quarter 2008 results included a preliminary estimate of the net benefits arising on the acquisition of Lehman Brothers North American investment banking and capital markets businesses; and net losses from credit market writedowns of £129m, comprising writedowns of £1.2bn offset by £1.1bn gains on the fair valuation of issued notes. In October, credit spreads narrowed substantially leading to a reversal of £1bn gains on the fair valuation of issued notes.

Highlights of the Capital Raising:

Key highlights of the Capital Raising include:

• An issue of £3bn of Reserve Capital Instruments ('RCIs') to Qatar Holding and entities representing the beneficial interests of HH Sheikh Mansour Bin Zayed Al Nahyan, a member of the Royal Family of Abu Dhabi ('HH Sheikh Mansour Bin Zayed Al Nahyan').

The RCIs will pay an annual coupon of 14% until June 2019. In conjunction with this issue, Qatar Holding and HH Sheikh Mansour Bin Zayed Al Nahyan have also subscribed (for a nominal consideration) for warrants ('Warrants') to subscribe at their option for up to 1,516,875,236 new ordinary shares of Barclays PLC ('Ordinary Shares') with an exercise price of 197.775 pence per share (equal to the Average Barclays Closing Price) or £3bn in aggregate, representing 18.1% of Barclays existing issued ordinary share capital.

The Warrants are exercisable at any time for a five year term from the date of issue.

• An issue of £2.8bn of Mandatorily Convertible Notes ('MCNs') to Qatar Holding,
Challenger Universal Limited ('Challenger') and HH Sheikh Mansour Bin Zayed Al Nahyan, and a further issue of up to £1.5bn of MCNs to existing institutional shareholders and other institutional investors by way of an accelerated non-underwritten book build placing.

The MCNs all carry the same terms and conditions. The MCNs will pay an annual coupon of 9.75% until conversion into Ordinary Shares, which will occur on or before 30th June 2009. Conversion will result in the issue of 2,805,396,799 new Ordinary Shares, representing 33.5%of Barclays existing issued ordinary share capital. The conversion price is 153.276 pence, a discount of 22.5% to the Average Barclays Closing Price.

• Ordinary Shares to be issued upon conversion of the MCNs, and, as the case may be, the exercise of Warrants, will increase Barclays equity tier one ratio, while the RCIs will qualify as innovative tier one capital to the extent they are within the innovative tier one allowance as defined by the FSA.

Investors:

Qatar Holding has agreed to invest £500m in MCNs and £1.5bn in RCIs, and has subscribed for Warrants to purchase up to £1.5bn of Ordinary Shares. Challenger has agreed to invest £300m in MCNs. Assuming the conversion of their MCNs and full exercise of their Warrants, and taking into account their existing holdings of Barclays shares, Qatar Holding would hold 1,607,402,170 Ordinary Shares, representing 12.7% of the fully diluted share capital (assuming the issue and conversion of £4.3bn of MCNs and full exercise of Warrants) (the 'Fully Diluted Share Capital') and Challenger would hold 353,704,737 Ordinary Shares, representing 2.8% of the Fully Diluted Share Capital.

HH Sheikh Mansour Bin Zayed Al Nahyan has agreed to invest £2bn in MCNs and £1.5bn in RCIs, and subscribed for Warrants to purchase up to £1.5bn of Ordinary Shares.

Assuming the conversion of their MCNs and full exercise of their Warrants, HH Sheikh Mansour Bin Zayed Al Nahyan would be beneficially entitled to 2,063,273,339 Ordinary Shares, representing 16.3% of the Fully Diluted Share Capital.

Barclays has appointed Barclays Capital, Credit Suisse and JPMorgan Cazenove as joint bookrunners to undertake an accelerated non-underwritten bookbuild placing of up to a further £1.5bn of MCNs with existing institutional shareholders and other institutional investors (the 'Institutional Placing').

John Varley, Group Chief Executive of Barclays, said:

"The capital raising announced today enables Barclays to meet the capital issuance plan agreed with the UK authorities following the decision by the FSA to increase the capital ratio requirements for all UK banks. We are pleased to have the continuing support of Qatar Holding and Challenger, and to welcome HH Sheikh Mansour Bin Zayed Al Nahyan as a substantial new investor, as well as enabling broad participation by existing institutional shareholders. Today's capital raising provides certainty and speed of execution, and combined with the strong third quarter performance in a volatile operating environment enables us to continue to implement our strategy and build our business by serving clients and customers around the world."

Marcus Agius, Chairman of Barclays, said, "Given the continuing uncertainties in world capital markets, the Board of Barclays resolved to satisfy the capital raising requirements agreed with the UK authorities without delay. This we have done. The Board believes that this maintains Barclays as a strong, independent and well capitalised bank."