Barclays Plc (BARC) plans to sell contingent bonds in the first deal by a U.K. bank since regulators told lenders to bolster capital buffers in September.
Barclays, which in June was fined for rigging interest rates in the latest of a series of regulatory missteps, is planning investor presentations on a potential deal, according to a person familiar with the matter, who asked not to be named because they’re not authorized to speak. Contingent bonds can convert to equity when capital ratios fall to a preset level, or alternatively may be written off.
While U.K. banks have cut business in the nations hardest hit by the euro region’s financial crisis, their exposure still amounts to an average of about 70 percent of core Tier 1 capital, according to the Bank of England’s Financial Policy Committee. At its September meeting, the FPC said banks should seek to retain earnings and raise outside capital “with the options including debt conversion and the issuance of suitable contingent capital instruments.”
“It sounds like they’ve reached agreement over how it would be viewed as regulatory capital and the FPC sounds quite keen on U.K. banks issuing it,” said Simon Adamson, an analyst at CreditSights Inc. in London. “It would be an alternative to issuing share capital. I wouldn’t be surprised if they combined it with a tender offer for some of their existing capital securities.”
Jon Laycock, a spokesman for Barclays in London, declined to comment.
The bank is holding presentations from tomorrow in the U.S., Europe and Asia, according to the person. The transaction is being managed by Barclays, helped by Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG and Morgan Stanley, the person said.