Barclays’ £470m boost

Source: Exec Digital UK

Date :20/06/2008 09:32:22

Reports are surfacing today, June 20, that Barclays is in the final stages of negotiating a capital tie up with one of Japan’s largest financial groups in a deal that could see a £470million injection of cash for the British lender.

Unnamed sources close to the proposed deal have said that the capital infusion to Barclays battered balance sheet will come from Sumitomo Mitsui Banking Corporation (SMBC).

That injection is widely expected to take the form of a private placement of shares, which would leave the Japanese financial giant with a two or three percent stake in the British lender.

Barclays is not understood to be negotiating any similar deals with other foreign banks.

Samurai Bond issuance

The deal, a so-called Samurai Bond insurance, comes in the wake of speculation which began earlier in the week that Barclays would turn to some of Asia and the Middle East’s largest sovereign wealth funds in its bid to restore its capital ratio following the US sub-prime mortgage shambles.

Barclays is still reeling from around £2.5billion in losses arising from the US mortgage crisis and resulting credit crunch.

Strengthening ties

The two banks are expected to deepen their existing alliance in Asian operations and the deal may even strengthen ties between the asset management businesses of the two institutions.

Japan’s capital markets are rapidly emerging as the favoured safe-haven for stricken US and European banking names like RBS, Citigroup and UBS – all of which are understood to be planning large capital raisings on the Japanese debt market. This news comes as little surprise.

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