RBS seeks deal on £12bn rights issue claims

Times, 28.07.16


Royal Bank of Scotland is attempting to settle a multibillion-pound legal claim brought by shareholders who say they were misled into supporting the bank’s £12 billion rights issue in 2008.


It is in talks with representatives of institutions and thousands of private investors who claim that its true state was hidden from them when they bought shares to stabilise the bank’s finances during the financial crisis, The Times can reveal.


When RBS collapsed six months later and needed a £45 billion bailout from taxpayers, the investors incurred losses said to run into hundreds of millions of pounds that they claim were down to alleged omissions in the prospectus.


The Times understands that five separate groups of shareholders have been negotiating with representatives of RBS, led by William Luker, the bank’s general counsel, since Monday in an attempt to reach a deal.


Any payout from RBS, which is 73 per cent taxpayer-owned, would be a further humiliation for the bank and Fred Goodwin, its disgraced former chief executive. However, RBS is keen to avoid the embarrassment of having former executives called as witnesses should the civil case go to trial next year.


The meeting is taking place at The Grove, a luxury hotel outside Watford, and involves more than 30 senior lawyers and advisers. Stephen Greenberg, a specialist in commercial dispute resolution, is understood to be mediating.


A source close to the negotiations said Mr Greenberg has told investors’ representatives that RBS “doesn’t want to go to court”, with talks focusing on the size of any potential payout.


The legal action from shareholders is one of a number of big legacy issues troubling the bank, with RBS also facing a multibillion-pound penalty from US authorities relating to the sale of mortgage bonds before the 2008 crisis.


Investors behind the latest legal action have claimed that they bought shares at an “inflated price” of £2 each in 2008 because the bank’s “inherent weaknesses were not adequately disclosed or fairly represented”. It is understood that there is tension between representatives of smaller shareholders and the law firms looking after the interests of big institutions, including Legal & General and Standard Life.


The majority of shareholders are demanding all of their money back plus costs, but some major institutions in the negotiations are understood to have been discussing an offer worth less than 40p a share.


There is concern among the smaller shareholders in the action that there was more knowledge among the largest institutions than has been publicly admitted over the true state of RBS’s finances before the rights issue.


They fear that some of the larger institutions’ position in the negotiations could be compromised by a desire to avoid the embarrassment of being asked in court whether they knew more than the market about the bank’s dire financial position, but invested on behalf of clients anyway.


Seventeen of these “insider” institutions that held a series of meetings with RBS in early 2008 have been identified during the legal process, The Times understands.


A spokeswoman for RBS said: “We continue to strongly defend these claims. We have always been clear that the bank is open to exploring an out-ofcourt resolution to matters, consistent with our legal obligations.”


RBoS Shareholders Action Group, which is leading the action, and Quinn Emanuel Urquhart & Sullivan, the law firm representing many of the big institutions in the action, did not respond to an invitation to comment.


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