Barclays announces fundraising plans for Lehman assets

Barclays, Britain’s third largest bank, has revealed plans for a £701 million share issue in a bid to finalise the acquisition of Lehman Brothers’ core assets. It is also planning to raise £600 million from existing shareholders.

The combined £1.3 billion will allow Barclays to finalise the deal and boost the bank’s capital strength, which has been hit by the credit crunch and is weaker than some of the other major British banks.

Wall Street giant, Lehman Brothers, was forced to file for bankruptcy on Monday after announcing it had failed to find a solution to its problems after a weekend of rescue talks with Barclays and Bank of America.

However, after withdrawing from discussions aimed at saving Lehman Brothers, Barclays confirmed that it would be buying certain assets of the failed investment bank, which are Lehman’s investment banking and capital markets businesses for £140 million in cash, plus Lehman’s New York headquarters and two data centres in New Jersey for an additional £800 million.

Preliminary approval for the sale was granted by a bankruptcy judge in New York earlier this week.

In July, Barclays raised £4.5 billion, which boosted its core tier 1 equity ratio to 6.3%.

The latest fundraising, plus a negative goodwill adjustment of $2 billion from the Lehman purchase, is likely to add 45-50 basis points to the capital ratio, to take it near the 6.7% mark.

In yesterday’s placing, Barclays said it sold 226 million shares at 310 pence each. The shares were sold by Credit Suisse, Deutsche Bank and JPMorgan Cazenove.

Barclays’ chief, John Varley, said the Lehman deal is part of a policy which will provide significant value to its shareholders, as well as increasing its presence in the US.

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