RBS hikes settlement offer to investors ahead of cash call trial

Royal Bank of Scotland (LSE: RBS.L - news) (RBS) has offered to pay millions of pounds more to shareholders suing it over the 2008 rights issue which preceded its collapse into Government control.

Sky News has learnt that lawyers acting for the bank have in the last fortnight proposed a 43.5p-per-share settlement with the RBoS Shareholder Action Group - the last-remaining claimant seeking redress over its £12bn cash call.

The proposal would represent an increased cost to RBS of several million pounds, according to analysts - and is marginally higher than the 41.5p-per-share settlement reached by the bank with four other claimant groups in recent months.

One source suggested that the improvement of the settlement offer by 2p-per-share was designed to cover the Action Group's higher legal fees since the resolution of the earlier claims.

Talk of a higher settlement offer worth 50p-per-share was dismissed by people close to the talks.

Insiders said on Tuesday that the RBoS Shareholder Action Group had rejected the 43.5p-per-share offer, with many of its members determined to see the case through to a trial scheduled to start in May.

If it does get that far, it would almost certainly involve Fred Goodwin, RBS's chief executive at the time of the rights issue, giving evidence in court.

Sky News revealed earlier this month that RBS had accelerated talks about a legal settlement with the Action Group, which counts 27,000 former RBS shareholders among its members.

The judge overseeing the case has asked the remaining claimants to disclose further details of their funding amid concerns that they would be unable to cover legal expenses if they lose the case.

Mr Goodwin, along with Sir Tom McKillop, the former RBS chairman, are named alongside the state-backed bank as defendants in the case.

A trial would inevitably provide the fullest account that Mr Goodwin and senior colleagues have given about the precursor to a crisis which saw £45.5bn of taxpayers' money injected into RBS.

The Government continues to own more than 70% of the bank, and there appears to be little prospect of it ever recouping the money it paid to save it from collapse.

Some members of the RBoS Shareholder Action Group are willing to settle but are said to be holding out for a deal worth at least 92p-per-share, just under half of what investors paid in the ill-fated rights issue.

The Group's total claim, if paid out in full, is valued at £1.2bn.

Prominent participants in the claim, which is being handled by Signature Litigation, include Aberdeen Asset Management (Frankfurt: 899502 - news) and AXA (Paris: FR0000120628 - news) .

Most of the 27,000 members were ordinary retail investors who lost money after subscribing to the new RBS shares.

In December, RBS reached agreement with three of the five shareholder groups suing it for allegedly misrepresenting its financial health.

The bank said at the time that it was "willing to make available settlement sums of up to £800m assuming settlement of all claims, to be split among all five shareholder groups, subject to agreement and claim validation".

Since then, it has reached a deal with another group, represented by the law firm Leon Kaye.

Vowing to press on towards a trial, the RBoS Group said in December that: "We had no option but to reject this inadequate [41.5p-per-share] offer and remain committed to seeking justice for our members through the courts."

RBS and the Shareholder Action Group both declined to comment on the latest settlement proposal or the ongoing talks between them.

To date, more than £100m has been spent by the bank defending the claims, a bill which includes the legal costs of Mr Goodwin and other former directors.