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Rbs Has To Reconsider Rights Issue After Investors Lose Appetite For Fundraisings

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http://business.timesonline.co.uk/tol/busi...icle6843494.ece

Royal Bank of Scotland (RBS) could be forced to scrap plans to raise up to £5 billion from a share sale after its investors indicated yesterday that they would be reluctant to back any more fundraising. The shares fell by more than 5 per cent to 53½p. They hit a 10p low in January.

The bank, which is 70 per cent-owned by the British taxpayer, had begun to sound out investors about whether they would support a rights issue or share placing of between £3 billion and £5 billion to part-pay for its participation in the Government’s insurance scheme for toxic assets.

The total cost of RBS joining the Asset Protection Scheme (APS) is likely to reach £19.5 billion, with the bank insuring £325 billion of its most troublesome securities against losses.

RBS shareholders said yesterday that they were “less than enthusiastic†about supporting a deal over the APS, particularly as the Government is set to increase its stake further. One said: “If RBS had come to the market six or eight weeks ago, a deal like this might have been snapped up. Now the markets are running out of puff and people’s risk appetite is rolling over.â€

The investor said that RBS’s main problem was that even raising £3 billion would represent the “tip of the iceberg†for the bank. “There is a drip-drip effect here. RBS has 60 billion shares, some 40 billion of which are currently in the hands of the Government. Raising this kind of money simply doesn’t change the dynamics. It is sobering,†he said.

Another investor who met RBS executives last week said that the bank was planning a rolling series of share sales between now and 2013 as the Government moved to reduce its stake. He said that RBS had been trying to convince investors that subscribing for shares could represent an opportunity to buy into the bank cheaply in advance of its full recovery.

A third shareholder said: “We are waiting to hear the details, but with no great enthusiasm. Normally, equity is raised to fix a problem — here, it is not entirely clear.â€

RBS emphasised last night that its plans were “tentative only†and no proposal had been drawn up to put to the bank’s board, which is led by Stephen Hester, the chief executive.

Industry insiders close to RBS said that the bank would press ahead with a share sale only if investors backed the idea. “If the feeling comes back that investors are not keen, the bank might look at other options,†one said.

In June 2008, four months before its rescue by the Government, RBS raised £12 billion from an 11-for-18-share rights issue priced at 200p a share.

Institutions snubbed the £20 billion bailout in October, which effectively gave the taxpayer a 70 per cent stake.

RBS is the second state-backed British banking group to explore ways of diluting its involvement in the APS. Lloyds Banking Group, which is 43.5 per cent-owned by the taxpayer, is also exploring a rights issue and could avoid the scheme entirely. The bank had originally planned to insure £260 billion of its securities, but has benefited from recovering markets and a stress test of its loans portfolio.

Investors said they could be forced to choose between the two bank rights issues if RBS chose to press ahead. Lloyds shares closed 2.77 per cent lower, down 3p at 107.6p.

Looks like a fundraisingless recovery.

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investors: RMBS from Lloyds, or shares from RBS, or bonds from Brown.

hmmm.....

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But ... it should be so simple. Lloyds buy RBS shares, RBS buy Lloyds shares. Bingo, both are recapitalised, no new taxpayer money :unsure:

/me still happy to invest in fundraisings where an underlying company looks good and the price is right. But discounting to oblivion tells of clutching at well-rotted straws, not the actions of a company that sees itself on the road to recovery.

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“If RBS had come to the market six or eight weeks ago, a deal like this might have been snapped up. Now the markets are running out of puff and people’s risk appetite is rolling over.â€

Well, they can't say they were not warned.

*points at sig*

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http://business.timesonline.co.uk/tol/busi...icle6843494.ece

Royal Bank of Scotland (RBS) could be forced to scrap plans to raise up to £5 billion from a share sale after its investors indicated yesterday that they would be reluctant to back any more fundraising. The shares fell by more than 5 per cent to 53½p. They hit a 10p low in January.

The bank, which is 70 per cent-owned by the British taxpayer, had begun to sound out investors about whether they would support a rights issue or share placing of between £3 billion and £5 billion to part-pay for its participation in the Government’s insurance scheme for toxic assets.

The total cost of RBS joining the Asset Protection Scheme (APS) is likely to reach £19.5 billion, with the bank insuring £325 billion of its most troublesome securities against losses.

RBS shareholders said yesterday that they were “less than enthusiastic†about supporting a deal over the APS, particularly as the Government is set to increase its stake further. One said: “If RBS had come to the market six or eight weeks ago, a deal like this might have been snapped up. Now the markets are running out of puff and people’s risk appetite is rolling over.â€

The investor said that RBS’s main problem was that even raising £3 billion would represent the “tip of the iceberg†for the bank. “There is a drip-drip effect here. RBS has 60 billion shares, some 40 billion of which are currently in the hands of the Government. Raising this kind of money simply doesn’t change the dynamics. It is sobering,†he said.

Another investor who met RBS executives last week said that the bank was planning a rolling series of share sales between now and 2013 as the Government moved to reduce its stake. He said that RBS had been trying to convince investors that subscribing for shares could represent an opportunity to buy into the bank cheaply in advance of its full recovery.

A third shareholder said: “We are waiting to hear the details, but with no great enthusiasm. Normally, equity is raised to fix a problem — here, it is not entirely clear.â€

RBS emphasised last night that its plans were “tentative only†and no proposal had been drawn up to put to the bank’s board, which is led by Stephen Hester, the chief executive.

Industry insiders close to RBS said that the bank would press ahead with a share sale only if investors backed the idea. “If the feeling comes back that investors are not keen, the bank might look at other options,†one said.

In June 2008, four months before its rescue by the Government, RBS raised £12 billion from an 11-for-18-share rights issue priced at 200p a share.

Institutions snubbed the £20 billion bailout in October, which effectively gave the taxpayer a 70 per cent stake.

RBS is the second state-backed British banking group to explore ways of diluting its involvement in the APS. Lloyds Banking Group, which is 43.5 per cent-owned by the taxpayer, is also exploring a rights issue and could avoid the scheme entirely. The bank had originally planned to insure £260 billion of its securities, but has benefited from recovering markets and a stress test of its loans portfolio.

Investors said they could be forced to choose between the two bank rights issues if RBS chose to press ahead. Lloyds shares closed 2.77 per cent lower, down 3p at 107.6p.

Printy printy will fix it.

For a given value of fix.

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