Barclays Plc (BARC), Britain’s second- biggest lender, is facing shareholder resistance to plans to issue contingent convertible bonds, or CoCos, that may dilute existing investors, people with knowledge of the talks said.
The Association of British Insurers, which represents companies with 1.8 trillion pounds ($2.8 trillion) of assets including Barclays' shares, issued a so-called amber top over the plan, a method of highlighting concern that the proposal may not be in investors’ interests, said the people, who asked not to be identified because the talks are private. It isn’t an instruction to vote against the resolution.
Under the plan, Barclays would seek approval to issue new stock equivalent to about 26 percent of its existing capital, according to the agenda for London-based Barclays’s annual general meeting on April 25. The new shares would only be issued if the CoCos converted into equity should the lender’s core Tier 1 capital ratio fall below 7 percent of assets weighted by risk.
Contingent convertible debt securities are a new addition to banks’ capital, introduced after the 2008 financial crisis showed that many of the debt instruments lenders counted as capital weren’t able to absorb losses. Barclays has issued $4 billion of notes that will be written down to zero if its capital ratio falls below 7 percent.
Officials at Barclays and the ABI declined to comment. The Guardian reported the alert earlier.