Big British investors consider suing RBS over share offer

Tue Sep 17, 2013 12:34pm EDT
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By Kirstin Ridley

LONDON (Reuters) - Four of Britain's largest institutional investors are part of a group considering suing state-owned Royal Bank of Scotland (RBS.L: Quote) over a share offer under disgraced former Chief Executive Fred Goodwin.

Prudential (PRU.L: Quote) and Universities Superannuation Scheme (USS) were named in court on Tuesday, alongside fund majors Standard Life (SL.L: Quote) and Legal & General (LGEN.L: Quote). They are part of a group that took up about 10 percent of the record 12 billion pound ($19 billion) rights issue in 2008, only to see the value of RBS's stock plummet.

Months after the cash call, RBS came close to collapse and had to be taken over by the state.

Thousands of shareholders are already claiming more than 4 billion pounds from RBS, alleging they were misled over the bank's financial strength in the rights issue prospectus published months before the bank spectacularly imploded.

But the case poses a dilemma for large institutions, some of which remain leading RBS shareholders. They want to underline the need for improved corporate governance, but would see the value of their investments sinking if the Edinburgh-based lender loses the case.

"In our case, you are talking really about investments that are made via index funds. And where there's a rights issue, you really do not have much choice on whether to subscribe," noted one source close to a major investor.

"If subscribing therefore causes a loss, it should be investigated whether the rights issue prospectus was accurate or not."

USS, Standard Life, Legal & General and Prudential all declined to comment.   Continued...

A woman shelters under an umbrella as she walks past a branch of the Royal Bank of Scotland in the City of London September 17, 2013. REUTERS/Stefan Wermuth