UK Edition
Royal Bank of Scotland set to avoid trial over £12bn crisis-era rights issue
Royal Bank of Scotland looks set to avoid an embarrassing 14-week High Court trial over the lender’s crisis-era £12bn cash call after the bulk of the investors behind the lawsuit indicated they will accept a £200m settlement.
The action group that has been marshalling 9,000 retail shareholders and about 20 institutional investors through the legal challenge has told its members that it has decided it “is in the best interests of all claimants” to agree to an 82p per share deal made by the lender.
“The viability of the case continuing to trial is now significantly in doubt,” read a letter sent to group members over the weekend. It is understood that in order to accept the offer, the group needs investors representing in excess of 70pc of the value of the original £520m claim against RBS to agree.
Sources indicate that institutional investors representing 40pc of the value, and retail platform investors representing another 40pc, have indicated they will formally accept the offer, along with some of the retail investors who comprise the remaining 20pc. As a result, solicitors Signature Litigation, acting for the group, are today expected to draw up a contract with the bank, conditional on the acceptances being confirmed.
It means that Fred Goodwin, RBS’s former chief executive who was stripped of his knighthood after the bank was rescued by the state, looks likely to escape being cross-examined in court over the circumstances surrounding the lender’s near-collapse.
Despite the likely £200m settlement, however, lawyers, funders and other advisers to the action group will take between 40pc and 45pc of the proceeds, meaning some investors will be left feeling short-changed.
RBS has been racing to avert a costly and complicated trial, scheduled to last 14 weeks, and doubled its offer to hold-out investors to 82p late on May 20, less than two days before the trial was to begin. Proceedings were adjourned for both sides to agree a settlement and the judge Mr Justice Hildyard will hear on Thursday if the trial should go ahead. The 82p-a-share offer is almost double the 41.2p-a-share offer accepted by four other groups of disgruntled investors in December. The shareholders alleged that the bank misled them about its financial health in the prospectus for its 2008 rights issue, a claim the lender, led by boss Ross McEwan, denies. Investors were hit with losses of as much as 80pc when the bank was bailed out just months later.
Mr Goodwin, ex-RBS chairman Sir Tom McKillop, and other former directors are defendants in the case, as well as the bank.
“Whilst the merits of the case against the bank remain strong, the merits against the individual director defendants have always been more mixed,” the action group admitted in the letter.
The group disclosed that it had been holding out for a 92p a share offer but that the prohibitive costs of continuing with the case, the risk of losing, and support for the bank’s offer from one the key funders of the lawsuit, understood to be multimillionaire businessman Trevor Hemmings, made it untenable to continue.
It warned: “That means that there is currently no available funding to fund the legal and other costs to take the matter to trial.”
Even if funding could be found by the investors who want to continue with the trial, the action group warned that the burden of sharing the costs among a smaller group of claimants made the case too risky.
RBS declined to comment.