RBS Lawsuit Settlement Said to Falter as Some Investors Hold Out

Bloomberg, 2.6.17


Royal Bank of Scotland Group Plc’s settlement with investors suing the bank, which seemed a certainty earlier in the week, has faltered as a handful of investors continue to hold out.


Some of the shareholders who indicated Monday they would end a lawsuit over the lender’s 2008 rights offering, now want a higher settlement offer, and the case could go to trial next week, according to two people familiar with the matter. While RBS Chief Executive Officer Ross McEwan is holding a meeting on Friday with some investors to try and find a solution, other claimants are seeking financing that will allow them to proceed to trial, according to one of people, who asked not to be identified because the negotiations are private.


RBS doubled its offer to investors to 82 pence ($1.05) per share as McEwan staged an 11th-hour personal intervention late last month, 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 had said on Monday its financial backer, one of the biggest claimants, had decided to accept the offer in the face of mounting legal fees and the risks of going to trial. The settlement push has stalled and other investors could still seek to push the case ahead to trial, said one of the people.


Spokespeople and lawyers for the investors either declined to comment or or didn’t respond to calls. RBS declined to comment.


“These sorts cases are pretty new in England and this sort of situation in group litigation is fairly novel,” said Mark Humphries, a lawyer at Humphries Kerstetter, who isn’t involved in the case. “I’m not aware of a situation like this having occurred in the past, but if there is any prospect of a case being settled without a trial then the court will make every effort to support the parties to reach that settlement.”


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 at the time.


Fred Goodwin, the bank’s former CEO, had been scheduled to testify in the case in what would mark a rare appearance for the Scottish banker who’s become something of a cartoon villain in relation to the RBS collapse.


About 15 percent of the 9,000 retail shareholders suing the bank have died since the former CEO 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.