Barclays To Issue $4 bln More CoCo Bonds After Swap Offer

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Britain's Barclays Plc is to issue almost $4 billion of bonds that can convert into shares if the bank hits trouble after an offer to debt investors to exchange old bonds had much higher than expected take-up.

The new bonds are the latest move by Barclays to adjust its balance sheet structure to improve its capital and leverage ratios to meet stricter new regulations.

Barclays last month offered the holders of some sterling, euro and dollar-denominated bonds the chance to swap into new instruments, called additional Tier 1 (AT1) securities, that meet the new global rules.

The bank announced the results of the offer on Friday and said as a result it will issue $1.2 billion of new dollar-denominated AT1 bonds, 698 million pounds ($1.2 billion) of sterling instruments, and 1.1 billion euros ($1.5 billion) of euro-denominated bonds.

Barclays has previously said it plans to issue about 7 billion pounds ($11.8 billion) of bonds that would convert into shares if its core equity ratio falls below a certain level, which for UK banks has been typically set at 7 percent.

It has so far sold about 2 billion pounds of the instruments, dubbed contingent capital or "CoCos", so the exchange offer will lift its issuance to over 4 billion pounds, or more than half its plan.

There has been a rush of European banks selling CoCos this year, which are regarded as riskier than normal debt due to the possibility of conversion into shares, but are attractive to investors as they typically pay annual interest of 6-9 percent.

Bankers predict up to a record $60 billion of AT1 bonds could be issued this year, led by banks such as Barclays, Deutsche Bank and Societe Generale.

The aim of the bonds is to create an extra layer of protection to prevent a repeat of the 2007-2009 financial crisis when taxpayers bore the brunt of bank bailouts.

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