RBS Investors Back Settlement That May Avert Goodwin Clash

Bloomberg, 29.05.17


Investors suing Royal Bank of Scotland Group Plc over a rights offering in 2008 accepted the lender’s improved settlement offer in a move that may allow former Chief Executive Officer Fred Goodwin to avoid a potentially embarrassing court appearance.


RBS doubled its offer to investors to 82 pence ($1.05) per share as CEO Ross McEwan staged an 11th-hour personal intervention last weekend, a person with knowledge of the matter has said. The trial had been postponed until June 7 while the claimants and their lawyers locate investors they had lost contact with over the years.


The RBoS Shareholder Action Group said its financial backer, one of the biggest claimants, had decided the offer was good enough to accept amid mounting legal fees and the risk that any eventual award may be less than the amount currently being offered.


“This is a significant sum and is effectively double the amount that was paid to the other settling claimant groups,” a spokesman for the group said in an emailed statement. “The viability of the case continuing to trial is now significantly in doubt.” RBS declined to comment on the statement, which came on a U.K. public holiday.


The claimants argued in their lawsuit that the bank deliberately concealed its financial weaknesses over its 12 billion-pound emergency rights offering in 2008. The bank countered that no cover-up took place, the rights issue prospectus included all the information investors needed, and the claimants are overlooking how volatile markets were in 2008.


Legal Costs


Explaining the decision to settle, the RBoS Shareholders Action Group said that “the longer the case continues, the more cost will be expended in legal fees and other costs, which will result in more deductions from any damages award.”


“Put simply we would have to significantly ‘beat’ the current offer of 82 pence to put the claimants in the same position as they would now be in, further down the line,” the group said.


“The claim is presently being funded by a substantial claimant in the action,” the group said. “That claimant has decided to accept the offer and they are no longer willing to fund the action. That means that there is currently no available funding to fund the legal and other costs to take the matter to trial.”


Goodwin is scheduled to testify in the case next month, in what would mark a rare appearance for the Scottish banker who’s become something of a cartoon villain for many of the U.K. investors who sued.


About 15 percent of the 9,000 retail shareholders suing the bank have died since Goodwin led the rights issue in the 2008 financial crisis, according to court documents. About 35 percent are pensioners, while 20 percent live outside the U.K. and 8 percent are described as blind trusts, which hold money on behalf of individuals.