In the time of 2008 Global Financial Crises, Barclays Bank is fourth-largest bank in the world, and second-largest bank in the United Kingdom, which has more than 300 years history. The GFC brought limited impact on Barclays’ operation in the crisis early stage. However, few month later (in September 2008), with the crisis spread all over the world, investors lose their confidence on financial institutions. The share price of Barclays dropped more than 40% in only one month. And even worse, now UK Government was raising the required Tier 1 ratio (from 9% to 11%) in order to protect stability of UK financial market. Barclays have to fund at least ￡6.5 from outside capital to ...view middle of the document...
Barclays would pay annual coupon rate at 14%, the value amount is ￡420 million. In addition, when Barclays issue RPI, Middle Eastern investors would agree to hold a warrants that subscribe for ordinary shares. The warrants holder has a right to purchase new issued ordinary shares at price around 197.77 pence.
Besides, Barclays would fund ￡4.3 billion via Mandatory Convertible Notes(MCNs), Barclays should pay 9.75% coupon to investor per year, which equals to ￡419.25 million. Moreover, when the MCN redeemed, the convert price of MCNs was at 22.5% discount to recent stock price (153.276 pence)
If Barclay accepted the Middle Eastern offer, it would cost Barclays at least 1.71 billion in the first year.
Qualitative Analysis of Offers
a. Government offer
Government list 6 constraints in their offer, including 1. limits Barclays from paying dividend, shareholders would suffer ￡0.39 billion dividend losses 2. Cut excessive remuneration and bonus 3. Change corporate governance and reform the director 4.Obligated to...