RBS Seeks Investor Approval for Contingent Convertible NotesHoward Mustoe
Royal Bank of Scotland Group Plc, Britain’s biggest government-owned lender, will ask investors to let it issue bonds that would become equity in a crisis, the third U.K. bank to say it will seek approval for such plans.
The so-called equity convertible notes would convert into RBS shares if the lender’s capital level fell below a preset amount, the Edinburgh-based company said in a statement today. The bank didn’t detail any immediate plans to issue the notes.
Because converting the securities into equity would dilute existing shareholders, RBS is asking shareholders for powers to issue shares with a nominal value of 1.5 billion pounds ($2.3 billion), about 4.4 billion pounds at today’s market price. Investors will vote on the proposals at a May 14 meeting.
RBS follows Barclays Plc and Lloyds Banking Group Plc in seeking investor backing to issue contingent convertible securities as regulators press British banks to bolster capital. The securities have drawn criticism from shareholder advisory groups, which focus on the risk CoCos will deny existing stockholders the right of first refusal on any new equity created if the securities convert into stock.
RBS fell 1.9 percent to 295.10 pence in London today.