RBS sets standard for shares take-up

Published on Monday 9 June 2008 21:29

ROYAL Bank of Scotland last night set the benchmark for the wave of post-credit crunch rights issues, winning the support of more than 95 per cent of its shareholders for its £12 billion cash call.

The uptake of the issue, the largest in UK corporate history, set the target for a raft of other companies making demands of their investors over the next few months.

Last night there were signs that the success of the RBS cash call issue would be quickly followed by the first disposal of one of the banks's assets.

It is set to sell Angel Trains, the train-leaasing company, to the Babcock & Brown firm for a price which is said to be between 3bn and 3.5bn.

The sales of RBS's insurance wing – which includes Direct Line and Churchill and which could raise around 7bn – is still not certain. If it is sold, it is likely to be towards the end of the year.

Yesterday, however, the first phase of the controversial recapitalisation of RBS – piloted through by under-pressure chief executive Sir Fred Goodwin and chairman Sir Tom McKillop – was completed.

The bank revealed that a total of 95.1 per cent of shareholders in Britain's second-biggest bank, had taken up the issue.

RBS claimed that the take-up was higher, as between 1 and 2 per cent of investors – in counties like Japan, Canada, South Africa, Australia and the US – were unable to take part for legal reasons.

According to RBS, that meant that just 3 per cent of shareholders made a conscious decision not to take part in the cash call.

However, despite the success of 95 per cent take up – reported in Saturday's Scotsman – the bank suffered a setback yesterday in selling the "rump" of shares not taken up in the offer.

Just under 5 per cent of shares were sold at a lower price than hoped as RBS shares fell almost 5 per cent after US investment bank Lehman Brothers said it would raise $6bn to rebuild capital.

RBS launched its rights issue to rebuild what some analysts warned was one of the most stretched bank balance sheets in Europe.

Its capital cushion was hit by its part in last year's takeover of Dutch bank ABN AMRO and by 8bn of writedowns on risky assets.

The strong take-up showed investors would back calls for cash even after steep falls in shares across the battered bank sector.

"It's a good level of take-up for one of the biggest ever rights issues, done in not easy circumstances," said Alan Beaney, head of investment at Principal Investment Management.

However, other institutions, including rival bank HBOS, which has asked for 4bn from its shareholders, are now set to be judged on RBS's percentage take-up.

The shares closed down 4.8 per cent at 233.75p, cutting the bank's market value to 38bn. The rump shares were placed by underwriters UBS, Merrill Lynch and Goldman Sachs at 230p each.