Meanwhile, back in the world of banking ... without much press attention, RBS is trying to get away a fair-sized cash tender, offering to buy back a bunch of relatively high-yielding debt and prefs at a very significant discount – 40% or more - to face value. They do this at the same time as they declare a 2-year freeze on payment of coupon, as they undertook when they entered HMG’s Asset Protection Scheme.
Why would anyone sell up at such a discount, when (a) the amount of coupon they will be foregoing is a fraction of this, and (b) they’ve been able to sell in the open market at roughly the same discount for months ? (Today they are trading higher than the tender price.) The nadir of their market value – around 80% discount to face value - was of course March ’09, since when the improvement has all been to do with improvement of fundamentals.
So unless you see a decline in fundamentals from this point … Let’s see how this tender goes over the next couple of weeks.
Also on the RBS front - they may be suing Goldman Sachs for the payout they had to make in respect of insurance ABN-Amro had written on one of those *odd* product packages GS put together in conjunction with their shorting clients ... Isn't the real story how shockingly bad was RBS due diligence over the ABN-Amro acquisition ? We said (several times !) this was a crazy deal when it happened, and nothing that's come to light subsequently changes the position: by mid '07, Fred the Shred had completely lost it. Sue away, chaps - but it'll be embarrassing in court.