Newspaper article The Evening Standard (London, England)

RBS Launches Biggest Rights Issue at [Pounds Sterling]12bn

Newspaper article The Evening Standard (London, England)

RBS Launches Biggest Rights Issue at [Pounds Sterling]12bn

Article excerpt

Byline: NICK GOODWAY

ROYAL Bank of Scotland today launched Britain's biggest-ever rightsissue as it set out to repair its balance sheet following writedowns of morethan [pounds sterling]8 billion from the subprime mortgages crisis.

Chairman Sir Tom McKillop virtually apologised to investors as he said that theboard had chosen to raise [pounds sterling]12 billion "whilst acknowledging with regret thedemands this would place on shareholders".

RBS will write down [pounds sterling]5.9 billion of its exposure to the credit markets, whichit hopes will cover the whole of 2008.

The rights issue is heavily discounted, with the new shares being sold for just200p compared with last night's closing share price of 372 12 p.

Today the shares, which have been highly volatile since talk of the rightsissue first surfaced last week, fell 912 p to 363p.

Sir Fred Goodwin, who many in the City say is battling for his future as chiefexecutive, said today's writedowns offered "a material stepping up of level ofcover against future losses".

Goodwin not only led last year's [pounds sterling]57 billion takeover of Dutch bank ABN Amro asthe credit crunch struck but had consistently denied the need to raise freshcapital.

But McKillop said: "The board has full confidence that the executive team willbe able to lead RBS through the current challenging conditions." The bank alsomade it very clear how vital today's cash-raising is.

It said the decision came "in the light of developments during March, includingthe severe and increasing deterioration in credit market conditions, theworsening economic outlook and the increased likelihood that credit marketswould remain difficult for some time".

That will put pressure on other banks to come clean on their writedowns andraise new capital.

Bank of England Governor Mervyn

King said as he launched yesterday's [pounds sterling]50 billion liquidity package forBritain's banks: "I am pleased that banks have recognised the need to raisecapital. …

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