Royal Bank of Scotland reaching out to investors to settle deal

Last minutes negotiations are on.

Two sources familiar with the matter at hand have disclosed that the Royal Bank of Scotland has tried to reach for a last minute settlement with a group of investors who had alleged that it had misled them over an increase in capital in 2008.

If the RBS were to successfully settle the lawsuit, it would save it from a lengthy and potentially embarrassing trial. Furthermore, a settlement will also bode well for Fred Goodwin, its former Chief Executive who is likely to face scrutiny over his leadership and decision-making capability at the time when the bank came close to a collapse.

If RBS doesn’t settle, a civil trial is expected to open today, wherein thousands of RBS investors have alleged that its former executives have portrayed a misleading picture of RBS’s financial health, before its $15.5 billion cash call in 2008 after which the government had to rescue it with a 45.8 billion pound bailout.

The RBS, in which the Scottish state has a 70% stake, has denied any wrongdoing over the 2008 issue and has stated that its former bosses did not act illegally.

Already the bank has settled with 87% of the investors who had originally brought the case. However the remaining 13% have so far rejected its offers and have said they are determined to take up the matter in court.

As per one of the sources familiar with the matter at hand, RBS has nearly doubled the amount it had offered to its shareholders who sought damages.

A source revealed that the litigating shareholders are willing to settle if RBS were to increase its offer to 100 pence.

“We won’t move unless they go that little bit further,” disclosed a source.

This outstanding group of shareholders represents almost 20 institutional investors and 9,000 retail shareholders.

Among the big institutional investors includes, local British council pension funds, Wells Fargo, the Boeing pension fund, and Bank of America Merrill Lynch.

According to sources, Ross McEwan, RBS’s CEO has been directly involved in negotiations over the weekend.

The bank is offering more than 80 pence for each RBS share held.

RBS declined to comment on the settlement offer.

A spokesman for the shareholder action group said he was not immediately able to comment.

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