British bank Barclays plc is reportedly reviewing the status of its private equity arm and considering a possible buyout. According to both The Times and Mail on Sunday, this could leave its investment banking arm Barclays Capital with about 40% of the equity and 60% in the hands of its management. There could also be pressure to sell part of the Barclays Private Equity buyout portfolio to raise additional capital for the parent group.
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A source close to the situation said various options were discussed
regularly at meetings between BarCap and Barclays PE, but there was
neither a plan in place nor a timetable and nothing was imminent.
Still, the 40:60 ratio could be a reflection of the fact that Barclays
is the private equity unit's cornerstone investor and has put in 40% of
its fund.
Mark Spinner, head of private equity at law firm Eversheds LLP, points
out that this structure means Barclays PE is not a true captive fund -
or likely to set an example to other captives - since its recent funds
have all been third party funds, which Barclays has "simply"
cornerstoned.
Spinner says another option being examined is reducing Barclays'
capital contribution to 20% from 40% to reduce its capital retention
requirements and improve its liquidity ratio. That might reflect a
different trend (one that's already been noticed at Permira for
example) of limited partners trying to reduce their commitments to
private equity. Says Spinner, "It will become increasingly difficult
for existing general partners raise their next fund." -
Jonathan BraudeSee story from The Times
