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INVESTORS GIVE GREEN LIGHT TO RBS CASH CALL

Saturday June 7,2008

By Andrew Johnson, Associate City Editor

Royal Bank of Scotland has succeeded in raising £12billion through Europe’s biggest-ever rights issue.

City insiders said at least 90 per cent of the bank’s shareholders had backed the controversial move by an 11am deadline.

The full results will be announced on Monday. It is believed the final figure could be around 95 per cent leaving advisers a rump of £600million to sell. It is uncertain how many small shareholders took up their rights. They own 8 per cent.

The success will provide welcome relief to the bank’s under-fire chief executive Sir Fred Goodwin and chairman Sir Tom McKillop.

Investors were furious at having to stump up the cash to shore up RBS’s capital reserves following the credit crunch and the bank’s role in the £56billion ABN Amro purchase.

There were fears the cash call might fail after shares hit an eight-year low of 226p earlier this week when Bradford & Bingley was forced to reprice its own rights issue plans.

RBS shares fell 13dp to 245dp, still comfortably above the issue price of 200p a share. One industry insider said investors had little choice but to back the rights issue because a failure to do so would have seen them nursing further losses on their investments.

This is because underwriters Goldman Sachs, UBS and Merrill Lynch would have been left holding billions of unsold stock on their books. They would have been forced to dump these shares on the market at an enormous discount.
One major shareholder said RBS had made an effort to address one area of concern and improved communication with
investors.

It is believed new shareholders have come on board as part of the process, including asset manager Och-Ziff. But speculation that activist investor The Children’s Investment Fund would take a stake proved to be untrue.

Focus is now moving on to HBOS, which is seeking £4billion. It has 2million small investors, who own 27 per cent of the bank.

Earlier this week Bradford & Bingley cut its rights issue price from 82p to 55p. It has sold a 23 per cent stake to private equity group TPG.