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| Shaykh Mansour Cheers His English FC On |
As I restart the blog after
my lesser ghaiba, besides posting on new items, I’ll be taking a selective
stroll through the past, disinterring old posts for a fresh look.
Two “bits” of recent news motivate
this post.
The GBP 1 billion court case by Amanda Staveley against Barclays that alleges illegal side payments to Qatari investors related to the offering disadvantaged her as she was a potential investor and not merely an adviser.
IPIC’s involvement in the 1MBD saga reminded me of their role in the Barclays 2008 transaction.
Attached below is a file
with an account of key milestones in HH Shaykh Mansour Bin Zayed Al Nahayan’s
(Sh. Mansour) investment in Barclays.
Because Barclays is listed
on the NYSE, it is subject to SEC filing requirements. Barclays resulting 6K, Schedule 13-G, and
Schedule 13-GA filings provide an excellent source of information on the MCNs
and the Warrants. The RCIs as debt
instruments were not reported in the filings. Note that Barclays relies on filings/information
provided by investors in the instruments—information it is not in a position to
independently verify. I’ve provided
sourcing in the file to save you the trouble of trawling through Barclays
voluminous filings to find the UAE related parties’ filings. However, key “bits” of information (terms and
conditions of the disposition of the MCNs, RCIs, and Warrants) are missing so
the conclusions drawn are educated guesses and guesstimates in some places. I’ve used my judgement to make some
estimates, but note the conclusions are not definitive.
Below is a summary of key
points. You’ll find my usually fussy
details in the attached file.
I’d like to highlight Point
#10 which outlines the three step series of transactions that moved the
Warrants from IPIC finally to a company controlled by Sh. Mansour. There is no explanation in public information
(none was required) on the prices, if any, associated with these transactions
nor on their rationale. AA is still
scratching his head to come up with a compelling economic or business reason
for this circuitous path. Maybe some of
you out there have your own theories. If
so, please post comments.
In late 2008 Barclays announced
a GBP 5.8 billion “hard” capital raising with the potential for an additional
GBP 1.2 billion if all the associated Warrants were exercised.
The offering comprised:
GBP 3 billion in 14%
perpetual Reserve Capital Instruments (RCIs)
GBP 2.8 billion in
Mandatorily Convertible Notes (MCNs)
Associated with the RCIs,
1,516,875,236 Warrants entitling the holders to convert each Warrant to one Barclay’s
common share at 197.775 Pence per share.
The Warrants were sold for a total consideration of GBP1.52. (That’s not a typo). In September Barclays had used Warrants to
place 226 million shares at 336 Pence each and in June approximately 1.5
billion shares to various institutional investors, including the Qatari
investors in the October 2008 capital raising.
Two GCC “investors”, (a) Qatar
Holdings and an associated company “representing the personal interests of the
Chairman of Qatar Holdings” and (2) HH Shaykh Mansour Bin Zayed Al Nahayan
subscribed respectively for GBP 2 billion and GBP 3.5 billion, later reduced
respectively to GBP1.75 billion and GBP3.25 billion.
Not that long ago, a younger AA was told by a
grey-bearded veteran that one of the benefits of working in the Middle East is
the opportunity to bring one’s personal life into business to create a better
“work-life balance”. AA has no doubt
that this “enlightened” approach is not limited to the MENA region.
Sh. Mansour’s final allocation was
GBP 2 billion of the MCNs, and GBP 1.25 billion of the RCIS. The purchase of the RCIs entitled Sh. Mansour to
Warrants to buy roughly 758.4 million shares.
The cost of the Warrants was 76 Pence.
Barclays subsequently
announced that Sh. Mansour would fund his investment through “an Abu Dhabi government investment vehicle”. Enter IPIC of which Sh. Mansour was then and is now still
Chairman.
IPIC took the investments on
its balance sheet, later recognizing an approximate US$2.2 billion profit in
2009 when it converted the MCNs to Barclays shares, then sold the shares, and
placed the RCIs. During 2009 it also
sold the Warrants (more on that below).
Based on an analysis of
IPIC’s 2008 and 2009 financials, it seems that the Warrants were sold for a
nominal price, perhaps the 76 Pence purchase price.
IPIC does not appear to have
benefited from the Warrants; instead these were sold/transferred in a series of
three transactions ultimately to an investment company controlled by Sh. Mansour as per
SEC filings. Also Barclays paid Sh. Mansour a
GBP 110 million fee on the transaction.
GBP 30 million of this was subsequently paid to Ms. Staveley for her
services. Based on the same analysis of
IPIC’s financials, Sh. Mansour appears to have retained the fee. It does not appear in IPIC’s earnings. Nor does it appear to have been netted
against the cost of the MCNs and RCIs.
While IPIC earned quite a
nice return for a roughly seven month use of its balance sheet, it was exposed
to the potential decline in the price of the MCNs or RCIs unless IPIC received
a guarantee against such losses from Sh. Mansour or another party. The existence or non-existence of such a
guarantee is not on the public record.
Warrants Transactions:
1 June 2009 IPIC grants KAQ
Holdings an Option to acquire Kadin, an IPIC subsidiary which holds the
Barclays investments. As per SEC filing,
KAQH is owned 100% by HE Khadem Al Qubaisi, a member of IPIC’s Board and a familiar
name in the 1MBD saga. SEC filings do
not require that the price or reason for a transaction be disclosed.
Since both Sh. Mansour and KAQ were members of the
Board this does not appear to have been a transaction designed to avoid an
appearance of conflict of interest, e.g., selling to the Chairman of IPIC. It’s not clear to what were the good economic
or business reasons for this transaction.
1 September 2009, KAQH
announces it has bought PCP 3 the Kadin subsidiary which holds the
Warrants. The earlier Option having been
amended to allow this.
Note there is an apparent discrepancy between
IPIC’s announcement in its 2008 financials that subsequent to 31 December 2008,
IPIC had sold “all” its investments in Barclays. If
the Warrants were carried at cost or near cost by IPIC (e.g., 76 Pence), an
explanation might that the carrying amount of the Warrants was “immaterial” and
need not be detailed.
12 February 2010, KAQH which
also reports changing its name to Future Capital Management Ltd. announces that
it has “transferred” (note the SEC filing does not use the term “sale” or
“sold”) PCP 3 to Nexus Capital Investing
Ltd. The reason for this transaction or the name change has AA scratching even harder. Lucky I have a hard head! NCIL is declared as 100% owned by Abdul
Aziz Al Ketbi.
17 February 2010, NCIL
exercises Warrants for 626.8 million shares.
7 July 2010, NCIL announces
it has “transferred” (again note the use of the term “transfer” as opposed to
“sale”) 100% of NCIL (owner of PCP 3 the holder of the 626.8 million shares and
remaining Warrants) to Abu Dhabi International United Investments LLC which is
declared as 100% owned by Sh. Mansour.
11 October 2010 NCIL
exercises the remaining Warrants. At
this point the estimated unrealized profit on the exercise is
some GBP 511 million or about $803 million.
Subsequent to this date,
NCIL engaged in hedging transactions with institutional counterparty or
counterparties finally ending its ownership of the shares 20 June 2013 as per
SEC filing. The actual profit realized
by Sh. Mansour is not a matter of public record.
Apparently BlogSpot does not allow the uploading of documents and so instead of AA's elegantly conceived and executed table, you will have to work with text post available at the link.
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