Barclays Bank cornered by contract

Jan. 22, 2009 at 9:59 AM

LONDON, Jan. 22 (UPI) -- Barclays bank in Britain would need to compensate Abu Dhabi investors handsomely if the government increased its stake in the bank, a key deal-maker said.

In a letter from Amanda Staveley, chief executive of private equity PCP Capital, to Abu Dhabi investor Sheik Mansour bin Zayed al-Nahyan, Staveley said "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."

The clause in the contract signed when Barclays raised $10 billion from Middle East investors last year stipulates that the investors would receive more shares without paying more should the bank dilute their investment, The Times of London reported Thursday.

"You could, subject to the size of any new investment, potentially end up owning significantly more of Barclays Bank at no extra cost," Staveley's letter explains.

The clause could prove significant as analyst fear the bank balance sheet could be in trouble, The Times said.

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