Barclays heads off WorldCom woe

BARCLAYS was one of the biggest shareholders in WorldCom. At its peak, Britain's third-biggest bank held more than 3% of WorldCom's shares - worth more than £500m at one stage.

Barclays had built up a stake of more than 100m WorldCom shares by the end of the first quarter of this year. They were then trading at a high of $6.89, making the US giant worth a comfortable £15bn.

Barclays would have held most of the shares on behalf of pensioners and other investment clients through its subsidiary, Barclays Global Investors (BGI), one of the world's biggest fund managers. The bank is believed to have also held shares on its own account worth about £75m at the end of March. But the shares were suspended in New York last Tuesday at only 83 cents. WorldCom is now worth less than £1.6bn and may file for bankruptcy.

The share price collapse is almost certain to result in huge losses for all pension funds invested in WorldCom. Barclays claimed that losses for its clients would be minimised because the shareholdings would have been spread across its 2,000-strong customer base.

The bank said BGI would have built up its large stake in WorldCom because it is a tracker fund that invests more as companies get bigger. But as WorldCom's value crashed under the weight of its debt burden and its share price fell, much of BGI's holding would have been unwound.