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Barclays Shares Drop 12% On Abu Dhabi Sale

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Shares in Barclays fell more than 12 per cent after Sheikh Mansour Bin Zayed al-Nahyan, the owner of Manchester City Football Club and a member of the Abu Dhabi Royal Family, confirmed today that he was selling more than half his investment in the British bank.

Barclays said that Internatonal Petroleum Investment Corporation (Ipic), which the Sheikh chairs, intended to sell mandatorily convertible notes (MCNs) for which it paid £2 billion last October.

Ipic will keep the £1.5 billion of warrants for Barclays shares that it bought at the same time, the bank said.

Shares in Barclays, up 268 per cent over the past three months, dropped 39p to 277.25p on the announcement.

The MCNs, which are paying a coupon of 9.75 per cent, are due to convert to common stock at the end of this month at 153p a share. Barclays’ shares have risen sharply in recent weeks as confidence that the bank would not need to be propped up by the Government grew.

Sheikh Mansour’s holding of MCNs is likely to be sold at a discount to the current Barclays share price, but he has still doubled his investment since buying into the bank last October

The intervention by the Sheik, which gave Ipic the option to buy a 16.3 per cent stake in the bank, helped Barclays to avoid taking a taxpayer loan.

However, the sale is likely to annoy both retail investors, who were locked out of the capital-raising last year, as well as institutional shareholders that were permitted to buy only £1.5 billion worth of MCNs between them.

At the time Barclays said that it wanted stronger ties to the Middle East as the West went into recession.

John Varley, the chief executive of Barclays, said last night that the bank and Ipic had been able to broaden their strategic and commercial relationship since last year’s investment.

Khadem Al Qubaisi, the managing director of Ipic, said: "The Emirate of Abu Dhabi intends to maintain a close commercial and strategic relationship with Barclays in the future.

"The decision to dispose of some of its interest in Barclays reflects the focus of Ipic's long-term investment strategy on hydrocarbon-related opportunities."

Question is will the government stop putting the artificial floor on barclays now, or will they let it wobble and then "officially" take it over?

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