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Tue 20 Oct 2009 08:05 PM

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Qatar pockets $1 billion from Barclays bail out

Qatar Holding clears profit from last year's investment in beleagured Barclays.

Qatar pockets $1 billion from Barclays bail out

Qatar Holding has cleared a cool $1 billion profit selling shares in Barclays Plc, a year after it helped to bail out Britain’s second largest bank.

The trading company, an arm of the Doha-based sovereign wealth fund Qatar Investment Authority, sold more than 379 million Barclays shares at 360 pence each, sale manager Credit Suisse AG said today in a statement. The firm acquired the shares by exercising warrants at 197.775 pence.

Barclays shares fell as much as 5.6 percent on the news.

Barclays raised more than 5 billion pounds from Middle Eastern investors last year, triggering criticism from shareholders including Legal & General Group Plc who weren’t first given an opportunity to buy new stock.

Shares in the bank have surged since touching a March low, as it avoided government aid unlike UK competitors Royal Bank of Scotland and Lloyds.

“It seems logical for the Qataris, having committed capital in the hour of need, to now take some money off the table,” said Michael Crawford, a fund manager at London-based LV Asset Management Ltd., which has about 7 billion pounds in assets, including Barclays stock. “It may take a few weeks for the market to absorb the extra stock; in any longer time period I don’t think it has any impact on the share price.”

Barclays will receive about $1.2 billion from the transaction, the company said in an earlier statement.

Qatar Holding is Barclays’s biggest shareholder. It retains a stake of more than 7 percent, plus about 379 million additional warrants, according to regulatory filings. The company sold 35 million Barclays shares in April.

“The decision to exercise the warrants and dispose of the resultant shares forms part of Qatar Holding’s portfolio management program and does not impact on our current intention to remain a long-term strategic shareholder in Barclays,” Chief Executive Officer Ahmad Al-Sayed said in the statement.

Qatar, the largest investor in J Sainsbury Plc, may use proceeds from the sale to increase its holding in the U.K.’s third-biggest grocery chain, said Simon Maughan, an analyst at MF Global Securities Ltd. in London.

“The thinking has to be that Qatar will keep its stake in Barclays where it is and place the remaining warrants into the market,” Maughan said. “This is to prepare the war chest for Sainsbury.”

Barclays turned to Qatar Holding and Abu Dhabi’s royal family for funding last October rather than accept a UK government bailout after the collapse of Lehman Brothers. Qatar also invested in Barclays in June 2008 as the bank sought to bolster capital and expand abroad.

Abu Dhabi investors made 1.46 billion pounds ($2.34 billion at today’s exchange rate) when they sold more than 1.3 billion Barclays shares in June this year. Abu Dhabi still holds warrants exercisable for more than 758 million Barclays shares at 197.775 pence.

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John 10 years ago

Singapore's first-family-run investment company Temasek took a $850m bath when it bailed out prematurely from Barclays. Clearly Qatar employs professional money managers, unlike the shop-house mentality of the Lee family, whose dour daughter in law presided over the halving of investment values in the fund, paid for by Singaporean citizens' contributions.