(Adds details, background)
By Steve Slater
LONDON, June 13 Britain's Barclays Plc
is to issue almost $4 billion of bonds that can convert into
shares if the bank hits trouble after an offer to debt
investors to exchange old bonds had much higher than expected
The new bonds are the latest move by Barclays to adjust its
balance sheet structure to improve its capital and leverage
ratios to meet stricter new regulations.
Barclays last month offered the holders of some sterling,
euro and dollar-denominated bonds the chance to swap into new
instruments, called additional Tier 1 (AT1) securities, that
meet the new global rules.
The bank announced the results of the offer on Friday and
said as a result it will issue $1.2 billion of new
dollar-denominated AT1 bonds, 698 million pounds ($1.2 billion)
of sterling instruments, and 1.1 billion euros ($1.5 billion) of
Barclays has previously said it plans to issue about 7
billion pounds ($11.8 billion) of bonds that would convert into
shares if its core equity ratio falls below a certain level,
which for UK banks has been typically set at 7 percent.
It has so far sold about 2 billion pounds of the
instruments, dubbed contingent capital or "CoCos", so the
exchange offer will lift its issuance to over 4 billion pounds,
or more than half its plan.
There has been a rush of European banks selling CoCos this
year, which are regarded as riskier than normal debt due to the
possibility of conversion into shares, but are attractive to
investors as they typically pay annual interest of 6-9 percent.
Bankers predict up to a record $60 billion of AT1 bonds
could be issued this year, led by banks such as Barclays,
Deutsche Bank and Societe Generale.
The aim of the bonds is to create an extra layer of
protection to prevent a repeat of the 2007-2009 financial crisis
when taxpayers bore the brunt of bank bailouts.
($1 = 0.7345 Euros)
($1 = 0.5956 British Pounds)
(Editing by Erica Billingham)