China Development Bank (CDB) plans to inject 136 million pounds into Barclays, the London-based lender said.
Barclays said it will raise 4.5 billion pounds by issuing 1.58 billion shares from existing investors including CDB and Singapore's Temasek Holdings in a move to increase its capital ratio and win new business in Asia.
Temasek will invest 200 million pounds, Barclays said.
The shares will be sold at 282 pence per share, much less than the 7.2 pound per share offered in July 2007 to help the UK bank bid for ABN Amro.
The shares will be made available to existing shareholders - at three new shares for 14 existing ones. Investors will have until July 17 to tender for the shares.
The investment will help CDB keep its stake at 3.1 percent at the enlarged share capital. CDB paid 2.2 billion euros for a 3.1 percent stake in Barclays to become one of Barclays' largest shareholders last July.
Analysts welcomed the move to raise capital. By raising capital this way, rather than through a rights issue, Barclays will save its share price from wide fluctuations, they said.
CDB said the investment is not only aimed at keeping it as one of the biggest shareholders of Barclays but also a way of showing confidence in the UK bank's strategy and prospects.
"CDB and Barclays have cooperated well in various fields since the stake purchase," a CDB official said. "We'll continue the strategic cooperation with Barclays."
Barclays was under great pressure to raise fresh capital to increase its capital ratio, a measure used by regulators to determine banks' financial strength.
The bank's capital cushion had fallen even below its 5.25 percent target after its 1.7 billion pounds of writedowns on credit investments, industry observers said.
The bank sought capital injection after its capital level fell below that of its UK competitors such as Royal Bank of Scotland Group Plc, they said.
Barclays CEO John Varley told media he will use half of the proceeds of the share sale to lift the bank's capital ratio above its target of 5.25 percent and the rest for new business opportunities.
CDB, founded in 1994 as a policy bank, has 32 branches across China and will soon be transformed into a full-fledged commercial bank.
(China Daily June 27, 2008)
