Barclays raises 7.3 billion from Middle East

By Steve Slater

LONDON (Reuters) - Middle East investors will own up to one third of Barclays after Abu Dhabi and Qatar provided most of 7.3 billion pounds raised by the bank on Friday to repair damage from the global financial crisis and avoid taking government rescue funds.

Barclays said the fundraising through a range of complex capital instruments will allow it to rebuild capital to levels required by the regulator without taking taxpayer cash.

That will allow the bank "to be in charge of our own destiny" without the threat of government interference, said Barclays Chairman Marcus Agius.

But its shares fell on concern the fundraising is more costly than cash on offer from the government. An issue of reserve capital instruments (RCIs) will pay annual interest of 14 percent until June 2019. Warrants for shares worth another 3 billion pounds could also be issued.

By 12:40 p.m. the shares were down 15 percent at 174 pence.

Barclays has lost billions of pounds from credit-related asset writedowns and is faced with a sharply slowing housing market and economy. In July, it raised 4.5 billion pounds from shareholders to prop up its capital base.

"Barclays has managed to avoid the constraint on dividends and general government interference which comes with the government scheme, but at a price," said Bruno Paulson, bank analyst at Bernstein. "The ... capital is fairly expensive."

Barclays said the coupon on the RCIs is tax deductable and after tax it will cost approximately 10 percent. After adding in the value of the warrants the cost should be similar to preference shares other banks are expected to issue, it said.