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Barclays £5.8bn rights issue sees Clifford Chance, Sullivan & Cromwell and Freshfields in the lead

Barclays has begun the biggest capital raising by a UK bank since 2009 under which Clifford Chance (CC), Sullivan & Cromwell and Freshfields Bruckhaus Deringer will lead on its initial £5.8bn rights issue, as the global financial institution moves to plug a £12.8bn funding gap.

A team from 3017-lawyer Magic Circle firm CC led by London corporate partner Patrick Sarch and capital markets partner Simon Thomas is advising on English law for Barclays, while a Sullivan & Cromwell team in London is advising the bank on US law, led by client relationship partners George White and John O’Connor.

Deputy general counsel Michael Shaw is leading the Barclays team.

At 2332-lawyer Magic Circle rival Freshfields, US capital markets partner Sarah Murphy heads the team providing English and US legal advice to the sponsor, joint bookrunners and underwriters including Credit Suisse, BofA Merrill Lynch, Deutsche Bank, ABN Amro, J.P Morgan Securities, BNP Paribas and ING Bank.

The prospectus was published on Tuesday (16 September) and forms part of the capital raising first announced in July, after the Prudential Regulation Authority (PRA) revealed the results of its review on the capital adequacy of major UK banks and building societies and a leverage ratio target of 3%. Barclays was found to have a PRA leverage ratio of 2.2%, leaving it with a shortfall of £12.8bn.

Shaw told Legal Business: ‘The most eye-catching piece of the leverage plan is, of course, the rights issue – the biggest equity raising in the UK since the crisis. Normally when a company carries out a rights issue or a similar capital raising, it would expect to announce and publish the prospectus simultaneously. The preparation of a prospectus takes a number of weeks of intense effort to ensure, once published, it contains the information needed by shareholders and investors for their investment decision.

‘However, Barclays needed to announce the leverage plan as soon as it was agreed with the PRA on 30 July, and there wasn’t time before then to prepare a prospectus. Unusually, the underwriting had to be done based just on the announcement and using a small group of initial underwriters. Once the rights issue was public, it was possible to expand the underwriting syndicate and then prepare the necessary prospectus. It really has been a great team effort to achieve everything in the time available.’

According to the prospectus, the bank will contest a £50m fine from the Financial Conduct Authority (FCA), which said the bank had ‘acted recklessly’ in breaching rules over disclosing the value of a deal with Qatari Holdings during a cash call in 2008. The FCA issued Barclays a warning notice on Friday 13 September.