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Edward Bramson, the activist investor targeting Barclays, extended the term of a controversial deal with Bank of America that allowed him to build the bulk of his stake with a $ 1.4 billion loan.
Bramson used BofA's loan to buy most of his Barclays shares, the FT reported in February, helping him acquire a 5.5% stake, making him the third largest shareholder in the company.
The loan was made under a complex derivatives contract, known as a "college-level shareholder", whereby BofA borrowed the shares of Barclays and sold them to Mr. Bramson while providing funding.
According to a recent US securities deposit, Bramson recently extended a series of put and call options under the deal, effectively limiting its potential gains and losses on the Barclays interest.
The options were originally scheduled to expire on October 21 of this year, but this date has been postponed to December 14, 2020, depending on the file.
In addition, people close to the case told the Financial Times that Royal Bank of Canada also helped Mr. Bramson strengthen his position by offering a smaller loan of about $ 41.6 million under the A derivatives structure known as the "variable prepaid term contract".
Bramson is trying to make his way to the Barclays board at its May 2 annual meeting and has called on the lender to reduce its trading operations.
These demands put him in conflict with Chief Executive Staley, who pledged to protect the UK's only remaining investment bank against further cuts.
Glbad Lewis, an influential shareholder advisory group, said investors should vote against Bramson at the bank's next annual meeting, citing the "questionable framework for share ownership" of the company. Activist as one of the reasons for his recommendation.
"While [Mr Bramson’s] The current campaign should serve as a call to management. . . we ultimately believe the support to [his] This proposal would entail considerably greater risks and uncertainties, "wrote Glbad Lewis in a report published Saturday.
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A person familiar with Bramson's strategy said that the decision to extend the agreement with BofA showed that the activist investor was committed to his investment in Barclays and that it was unlikely that He sold his stake if he could not get enough votes to win a seat on the board of directors.
The agreement between BofA and Bramson has drawn criticism from Barclays and some of its major shareholders, who argue that the activist uses leverage – and that the limits of its advantages and disadvantages prevent them from aligning with other major investors.
BofA's decision to fund Bramson also sparked a debate in the industry over whether investment banks should help activists attack their rivals in violation of the gentleman's agreement.
"We would not fund a hostile situation – we were very clear about it," said a senior executive from another major global bank competing with BofA.
According to a person familiar with the agreement, BofA was not contractually obliged to extend the agreement with Mr. Bramson and, in doing so, it actually doubled its decision to fund the activist.
BofA, Mr. Bramson, RBC and Barclays declined to comment.
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