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Wed 8 Jul 2009 07:30 AM

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Qatar's Barclays move makes paper profits of $1.12bn

Gulf state's rescue investment at height of crisis reaps potentially huge dividends.

The Qatari investment in banking giant Barclays at the height of the global financial crisis has resulted in the country sitting on paper profits of more than 700 million pounds ($1.12bn), it was reported on Wednesday.

The Qatar Investment Authority (QIA) and Challenger, a vehicle backed by Qatar’s ruling family, bought 800m pounds of convertible notes that could be changed into Barclays shares at 153 pence last October.

Under the terms of the agreement these notes converted into Barclay’s shares at the end of last month.

At Barclays’ closing share price of 292 3/4 pence on Tuesday, the investment is worth about 1.53bn pounds. However, the QIA and Challenger will realise the profit only if they sell up, The Peninsula reported.

At present Qatari investors have holdings and warrants equivalent to a stake of about 15 percent in the bank.

QIA was one of two Middle Eastern investors that Barclays turned to last October as part of massive capital raising through an institutional placement, which helped the bank to avoid having to take capital from the British government.

The other investor was Abu Dhabi, which pocketed almost 1.5bn pounds in profit last month after selling a near-12 percent stake in Barclays after only eight months.

Shares in Barclays fell below 50 pence in January — leaving the Gulf investors’ share options substantially in the red — but have bounced back as the threat of nationalisation receded.

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