Barclays raises $12 billion, sources say CoBa may tap state

By Steve Slater and Philipp Halstrick

LONDON/FRANKFURT (Reuters) - Barclays tapped Middle East investors for the bulk of its 7.3 billion pounds ($12.1 billion) cash injection, while sources familiar with the situation said Commerzbank is interested in German state funds.

As banks continue to soak up capital to help them survive the global financial crisis, Britain's Barclays Plc tapped Abu Dhabi and Qatar to provide most of its fresh cash and avoid accepting government support.

By contrast Germany's Commerzbank AG is interested in a capital injection under the Government's emergency bailout scheme, which could lead to Germany taking a stake in the country's second-biggest bank, sources said.

"Commerzbank is interested in all the instruments that the fund is offering -- also on recapitalization," said one source.

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

Barclays Chairman Marcus Agius said this approach would allow the bank to be in charge of its own destiny without the threat of government interference.

Commerzbank is also grappling with the fallout from the global crisis which spurred the German government to launch an emergency fund offering guarantees and capital to the country's banks.

Exposure to investments in Iceland as well as to collapsed Wall Street investment bank Lehman Brothers are compounding Commerzbank's difficulties, said one of the sources.

"The third quarter was hit by exposure to Iceland and Lehman Brothers," said the source. "That's another reason that the bank must keep a close eye on its capital base."

Commerzbank shares were down 8.4 percent at 8.235 euros by 1411 GMT while Barclays stock was down 17.1 percent at 169.8 pence.

Analysts said there was concern Barclays' fundraising is more costly than cash on offer from the British government in its equivalent bank bailout plan.

COST OF MONEY

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.

"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 brokerage Bernstein.

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.