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April 10, 2009

Barclays confirms sale of iShares to CVC Capital

by Gill Montia

Story link: Barclays confirms sale of iShares to CVC Capital

Barclays has sold its iShares business for $4.4 billion, while at the same time financing the sale.

The asset management unit has been acquired by private equity firm, CVC Capital Partners, with the help of a $3.1 billion loan from the bank.

Completion of the transaction is expected in November with Barclays retaining 51% of the debt for five years; the remainder may be syndicated after a year.

However, the terms of the deal mean that the bank remains open to offers for iShares until mid-June, although a penalty is payable to CVC if Barclays chooses another buyer.

The sale will net $2.2 billion, which the group says will increase its tier one capital ratio to 7.2% (previously 6.7%).

The disposal forms part of Barclays’ commitment to a path of self-determination, avoiding both government bail-outs and the Treasury’s Asset Protection Scheme.

Last month the Financial Services Authority (FSA) completed a “stress-test” of the bank and concluded that it did not need to bolster its balance sheet.

However, concerns about Barclays’ exposure to structured credit and monoline insurers remain.

French bank Société Générale responded to the FSA examination by warning that the group may yet need to raise a substantial amount of cash to bolster its reserves.

 

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