Barclays may seek shareholder approval for more CoCos
February 26, 2013 3:21 AM EST
The bonds would help the bank to meet tougher demands from regulators, requiring banks to hold more capital to safeguard taxpayers. A slice of this additional cushion can be accounted for with contingent capital bonds or other hybrid capital. Barclays could issue as much as 7 billion pounds of contingent capital bonds, known as CoCos, which allow banks to shore up their balance sheets if their finances weaken significantly.
The bank, which raised $3 billion through a similar bond sale in November, could ask for approval from shareholders at its annual meeting on April 25, said the source, who declined to be named because proposals for the meeting have not been finalised.
Barclays would need approval from investors because existing shareholdings could be diluted if it were to sell a significant amount of bonds that convert into shares if its core capital ratio falls below a certain level.
The bank declined to comment, but it may prefer to stick with the structure used in November, selling bonds that are wiped out - rather than being converted into shares - if its core capital ratio falls below 7 percent.
Britain's Financial Services Authority took a hard line on the structure of November's deal, requiring a "high trigger" to ensure that Barclays rebuilds its capital early if its balance sheet deteriorates.
Chief Executive Antony Jenkins told analysts when he set out his strategy two weeks ago that he plans to build contingent capital "over the next few years" and expects loss-absorbing capital instruments to cover about 2 percent of its risk-weighted assets (RWAs).
RWAs are a bank's assets, usually loans, adjusted for the likelihood of non-payment and are a key determinant of a bank's capital requirements.
Jenkins expects RWAs to be about 440 billion pounds in 2015, implying contingent capital needs of almost 9 billion pounds.
The Sunday Telegraph newspaper said on Sunday that Barclays would sell up to 3 billion pounds of CoCos in early May if it gains approval from shareholders.
The greater risk attached to contingent bonds means that they are more costly to issue. Barclays is paying annual interest of 7.625 percent on the bonds it issued last year, which have a 10-year maturity.
That offer attracted $17 billion of demand, despite concern that the high trigger level would deter prospective buyers. ($1 = 0.6551 British pounds)
(Reporting by Steve Slater; Editing by David Goodman)
Most Popular Slideshows
- Taylor Swift Named People's Best Dressed Stars Of 2014 [PHOTOS]
- Champions League Results: Barcelona Barely Escapes With A Win, Chelsea Fails To Hold On To The Lead [PHOTOS]
- Jeremy Lin, Kobe Bryant Among The Top 5 Overpaid Players In The NBA (Part 1 - Western Conference)
- Reasons Why Michael Jordan Is Better Than LeBron James [PHOTOS And VIDEO]
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Google Release Roundup: New Nexus 6, Nexus 8, Android 5.0 L Launch and Killer Features
- Xperia Z, Xperia ZL, Xperia ZR Android 4.4.4 KitKat Update Guide
- Samsung SM-A500 (aka Wallet-Friendly Galaxy Alpha) Clears TENAA Revealing Images And Specs
- Amazon Announces Kindle Fire HD 6, Kindle Fire HD 7 Tablets; Official Release Date Is Oct 2
- 'ISIL Has To Be Defeated, Plain And Simple, End Of Story,' Sen. John Kerry
- Chinese Property Developer Flees To New Zealand After China Arrests Vice-Mayor For Corrupt Deals
- Amazon Announces 7 New Kindles: Upgraded Amazon 8.9-inch Kindle Fire HDX Available Now On Pre-order