Salz Review - Wall Street Journal

43
Salz Review
An Independent Review of Barclays’ Business Practices
October 2009 and a further sale of warrants worth around £750 million in
November 2012.
5.19 While investors might have preferred to have had the opportunity to participate in a
pre-emptive offer, we see no basis now to criticise the conclusion of Barclays’
management and the Board that, with capital needed to be raised urgently and
considerable uncertainty in the markets, a full pre-emptive offer carried a significant
risk of failure which it was in the bank’s interest to avoid. It is easy to forget the
urgency when looking back now, but the October/November capital raising took
place at a unique time of unpredictability and insecurity for the market and Barclays’
ability to avoid a UK government equity investment was far from inevitable.
The Board’s doubts about the likely strength of support for a fully pre-emptive offer
seem to us legitimate given the poor level of shareholder take-up of the open offer in
July 2008 and of offerings of other banks around that time. However, given the level
of investor dissatisfaction at the decision, there must be a question whether Barclays
could have communicated more effectively with existing shareholders as to its
rationale for the structure of the capital raising which it adopted. In the event, the
relevant shareholder resolutions were passed by over 85% of those voting.
5.20 Barclays disclosed that the “commissions, fees and expenses” for the
October/November 2008 capital raising amounted to £300 million, payable primarily
to Qatar Holding, Challenger and HH Sheikh Mansour bin Zayed Al Nahyan, a
member of the Abu Dhabi royal family, all of whom subscribed to the capital
raising. 61
5.21 Barclays’ most recent public statements refer to:
― Investigations by the FSA and Serious Fraud Office in connection with
certain commercial agreements between Barclays and Qatari interests and
whether these may have related to Barclays capital raisings in June and
November 2008;
― An investigation by the US Department of Justice and US Securities and
Exchange Commission into whether the Group’s relationships with third
parties who assist Barclays to win or retain business are compliant with the
US Foreign Corrupt Practices Act. 62
5.22 In view of the continuing investigations into these capital raisings, we have not
considered issues concerning the sufficiency of disclosure or the commercial
arrangements.
Stress Tests
5.23 In early 2009 the FSA mandated a stress test to assess the resilience of the banking
industry’s capital base in the event of a severe economic downturn. Given the
concerns about Barclays’ valuation of its assets, there was strong market sentiment
that Barclays could fail the test. This was a crucial moment in Barclays’ struggle to
61 Barclays, “Barclays announces Capital Raising”, press release, 31 October 2008.
62 Barclays, 2012 Annual Report, March 2013.