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Mon 17 Nov 2008 03:21 PM

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Advisors urge 'no' vote on Mideast stake in Barclays

Corporate governance group PIRC opposes proposed $7.4bn fundraising plan.

Corporate governance advisers PIRC called on shareholders in British bank Barclays Plc to vote against the lender's planned 5 billion pound ($7.4 billion) fundraising from investors in the Middle East.

The capital raising would significantly dilute the holdings of existing shareholders, and represents no improvement over the alternative of taking part in the government's rescue package for the banking sector, PIRC said in a statement on Monday.

"At least a part of the company's investor base should send a clear, unequivocal message that they do not think this was a good solution to the bank's current situation, and that it has come at a heavy price for existing shareholders," PIRC managing director Alan MacDougall said.

Barclays is planning to raise 5 billion pounds from the sale of complex capital instruments, including some offering annual interest of 14 percent, to investors in Abu Dhabi and Qatar.

Critics of the plan, drawn up by Barclays as a means of raising capital without potentially compromising its operational independence by accepting government funds, say it does not allow existing investors to participate on the same terms and is more expensive than taking the government's cash.

Last week, the Association of British Insurers, which represents about a fifth of UK shareholders, gave the fundraising plan an "amber" rating, reflecting concerns some investors had about the cost of the package in terms of dilution and fees.

PIRC, which advises fund managers and pension funds with combined assets of 1.5 trillion pounds, said on Monday it was not worried that the government might try to influence banks taking part in the publicly funded bailout programme.

"PIRC does not believe that the deal represents an improvement over the option of raising capital from the Treasury, and in light of recent developments, does not share the company's concerns about state interference in the bank's operations if this option had been taken," it said.

However, PIRC's MacDougall said the capital plan would probably survive the shareholder vote, scheduled for Nov. 24.

"It is very likely that there will be a number of other investors who will assent to this deal, as they do to almost all proposals made by management of investee businesses, and we do not expect it to fail," he said. (Reuters)

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