RBS Trial Delayed as Lender Said to Double Settlement Offer

  • Ross McEwan held weekend talks seeking deal, person says
  • CEO’s direct intervention comes before trial starts on Monday

Royal Bank of Scotland Group Plc’s trial over its 2008 rights issue was postponed as investors accusing the bank of hiding its financial woes weigh an improved settlement offer.

The bank doubled its offer as Chief Executive Officer Ross McEwan staged a last-minute personal intervention, according to a person with knowledge of the matter, who asked not to be identified because the details are private. RBS increased its offer to 82 pence per share, up from earlier settlements of 41.2 pence and 43.2 pence with other claimants in the class action suit, the person added.

Both sides are "hopeful of making progress" in settlement talks, Jonathan Nash, a lawyer for the investors, said at a brief court hearing Monday. Later in the day, the judge agreed to push the trial’s start back to Wednesday, a spokesman for the claimants said.

“Significant progress has been made today as a result of RBS’s greatly increased offer,” according to an e-mailed statement.

The trial that was due to start Monday could force RBS to relive an ugly period during the 2008 financial crisis, when it held a 12 billion-pound ($15.6 billion) emergency rights offering only to be rescued months later in a record government bailout. Ex-CEO Fred Goodwin is scheduled to give witness testimony next month, marking a rare appearance for the Scottish banker who’s become something of a cartoon villain for many of the U.K. investors who sued.

The claimants argue in their lawsuit that the bank deliberately concealed its financial weaknesses before the rights issue. The bank will counter that no cover-up took place, the rights issue prospectus included all the information investors needed, and the claimants are overlooking how volatile markets were in 2008.

Filed in March 2013, the suit swelled to over 27,000 claimants seeking as much as 4 billion pounds, but the bank set aside 800 million pounds to settle with as many investors as possible in a bid to put some distance between current management and decisions that were made a decade ago. Although the majority of investors agreed to settle at the end of last year, one group is holding out, seeking about 520 million pounds at trial.

Read more about the RBS rights issue litigation here

Sky News reported details of the offer earlier on Monday.

Last-minute settlements are common before high-profile trials as seek ways to avoid the cost of going to a full trial which could result in weeks of difficult publicity for those involved. Earlier this month, Societe Generale SA agreed to pay 963 million euros ($1.1 billion) to resolve its dispute with the Libyan Investment Authority two days after the trial was scheduled to start.

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