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June 9, 2008

RBS £12bn rights issue 95% subscribed

by Gill Montia

Story link: RBS £12bn rights issue 95% subscribed

The UK banking sector has today breathed a sigh of relief on the news that Royal Bank of Scotland’s (RBS) £12 billion rights issue has proceeded to plan, having been 95.11% subscribed.

Last week’s banking news was dominated by the difficulties experienced by Bradford & Bingley in its attempts to raise only a few hundred million in its rights issue.

The outcome of the RBS fund raising has, therefore, been anxiously awaited amid fears that the group’s share price could fall dramatically if the investment banks underwriting the issue were left with large quantities of stock.

However, UBS, Merrill Lynch and Goldman Sachs are holding only around £600 million worth of RBS shares, which they intend to place today.

Shareholders who have not taken up their rights will receive a cheque for the difference between the issue price of 200p and the price at which these shares are placed.

RBS is in the process of raising a further £7 billion through the sale of its insurance business, including Churchill and Direct Line. It is also selling Angel Trains, its rolling stock business.

The group has written down around £6 billion in sub-prime related debt and also needs to bolster its balance sheet because of its acquisition of Dutch bank ABN Amro last year.

 

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