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Preferential shares of £5 billion sold to the Treasury
The Royal Bank of Scotland has outlined its plans to raise £19.7 billion having revealed the fact that is has seen its asset value fall by £6.1 billion during 2008. The bank says it is planning on raising £15 billion through selling shares. The shares are priced at 65.5pence each which is slightly above the market share price of 64.8 pence. The share offer is fully underwritten by the Government which will buy the shares using taxpayer’s funds if it is unable to sell them to the public.
The Government will own £5 billion worth of shares through a preferential sale of stock using tax payer’s money; the preference is for these shares to be repaid before any dividends are paid out to other shareholders in the future.
The chief executive designate of RBS, Stephen Hester, said he hopes to start paying a dividend to shareholders in 2010, either through paying the Government back or by a new placing of preference shares once the conditions in the financial market improved.
Mr Hester said he was unsure whether the banks staff would be paid any bonuses this year and it remains unclear how many staff will lose their jobs. The chairman of RBS Sir Tom McKillop said that the decision had been reached with regret as they were aware of the impact it would have on their existing shareholders. He went on to say “This has been an extremely disappointing and difficult time for shareholders, employees and customers but I want to assure you that all of the board’s energy is devoted to re establishing the value and reputation of the group.”
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