Barclays capital plan rejigged, pay bonuses axed

By Paul Hoskins and Steve Slater

LONDON (Reuters) - British bank Barclays (BARC.L) moved to head off a revolt by shareholders on Tuesday by offering them a slice of a 5.8 billion-pound ($8.7 billion) capital injection from Middle East investors and scrapping this year's executive bonuses.

Shareholders will be offered 500 million pounds of the 3 billion pounds of reserve capital instruments (RCIs) paying an annual interest rate of 14 percent that had previously been earmarked for investors in Qatar and Abu Dhabi.

Barclays said its entire board will also stand for re-election in April, confirming a Reuters report on Monday.

The move comes after some investors had said the terms of the capital issue were too generous to the Middle East investors and analysts said it should improve the prospect of the issue being approved at a November 24 extraordinary shareholders' meeting.

But the Middle East investors keep share warrants attached to the RCIs and commission, so it does not change much and shareholder dilution will remain the same, analysts said.

"This represents a small, albeit non-equity, olive branch to existing institutional investors," said James Hutson, analyst at Keefe, Bruyette & Woods.

Barclays shares were down 6 percent at 145.1 pence at 7:30 a.m. EST, when the DJ Stoxx European banking sector index .SX7P was down 5 percent.

BONUSES AXED

Britain's second biggest bank said the move followed meetings between executives and investors in recent days.

Qatar's sovereign wealth fund and Sheikh Mansour Bin Zayed Al Nahyan, a brother of Abu Dhabi's ruler, will each make up to 250 million pounds of RCIs available to existing shareholders in a bookbuilding process on Tuesday, the bank said.

"This is an act of good faith," Ali Jassim, advisor to Sheikh Mansour, said in a statement to Reuters.

The RCIs, which pay 14 percent annually until 2019, carry warrants for up to 1.5 billion shares, exercisable over five years at a price of 197.8 pence a share.

KBW's Hutson said perhaps more positive than the offer of RCIs was the move by directors to waive their 2008 bonuses.

Barclays follows U.S. investment bank Goldman Sachs (GS.N) and Swiss bank UBS (UBSN.VX) in this week scrapping all bonuses for executives this year.

Almost all banks are under pressure to scrap bonuses and change pay structures, which have encouraged risk taking and contributed to a global credit crisis, regulators and some bankers have said.