Page last updated at 19:12 GMT, Thursday, 13 November 2008

Barclays' Gulf cash move attacked

Barclays bank branch
RREV says going to the UK government would have been a better option

Barclays' plans to raise up to 5.8bn from the Middle East have been attacked by a key advisory group, the BBC has learned.

The criticism comes in a report by RREV, a body that advises the UK's institutional investors, such as the large pension funds.

While it stops short of saying shareholders should vote against the proposal, RREV recommends they abstain.

Barclays is going to the Middle East instead of the UK government for funds.

Equity sale

Like most UK lenders, Barclays has been told by the Financial Services Authority that as a result of the global credit squeeze it needs to raise capital.

But unlike the others, Barclays has chosen not to take part in the government's multi-billion pound rescue plan, instead saying on 31 October that the decision to go to Gulf investors would "keep it strong and independent".

It's very dangerous for shareholders to reject the plan and deprive Barclays of the money
BBC Business Editor Robert Peston

It is securing the money mainly from the state investment funds and royal families of Qatar and Abu Dhabi, with the deal expected to be completed in the coming weeks.

It will give the Middle Eastern investors a stake in Barclays of almost 32%.

'Strong concerns'

RREV said that "based on our review of the terms of the proposal, in particular the large discount to the average closing price of Barclays' shares, the high cost associated with it, the dilutive nature of the capital raising, and the negative market reaction since its announcement, we consider that the terms of the proposed capital raising by Barclays may not compare favourably with the proposed government funding chosen by Lloyds".

However, RREV said Barclays shareholders should not reject the deal "considering the high level of uncertainty in the current markets".

BBC business editor Robert Peston said RREV's comments would be "an embarrassment" for Barclays.

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