Lawyers representing tens of thousands of Royal Bank of Scotland (RBS) shareholders have held tentative talks to settle a 1.2 billion pound ($1.5 billion) damages claim over the lender’s 2008 rights issue that was launched shortly before a state bailout, two sources said.
The sources, who are familiar with the situation, said RBS and the RBoS Shareholder Action group, which includes 27,000 private investors, former and current RBS staff and about 100 institutions, had discussed an out-of-court deal.
In a move highlighting the difficulties of rallying such a vast group — the last of five shareholder claims yet to settle with the bank — one source warned that some retail investors were determined to take the case to trial in May.
One of the investors backing those retail claimants is multimillionaire businessman Trevor Hemmings, according to court documents seen by Reuters. His involvement will go some way to answering questions by RBS and a judge as to whether the claimants have adequate funding.
The bank has been applying pressure on the shareholder group to reveal its backers and sources of funding after it switched legal teams three times and some institutions broke away in 2015 to launch separate litigation.
A settlement would end one of the most complex and costly litigation battles in English legal history.
It would also spare RBS, which is still more than 70 percent owned by the state, a lengthy and potentially embarrassing court case that would put its disgraced former chief executive Fred Goodwin and other former senior staff in the witness box.
A spokesman confirmed that Hemmings is part-funding the litigation through his private vehicle London and Northern Capital Partners.
“Mr Hemmings was a supportive investor in RBS for many years and backed the rights issue. However, like many other investors, he feels the basis on which he participated in the rights issue was misleading and is rightfully seeking redress,” the spokesman added.
“Mr Hemmings stands shoulder to shoulder with thousands of private shareholders seeking to hold the company to account.”
Hemmings lost “a considerable amount of money” as a result of the collapse in RBS’s share price in 2009, according to comments made by his spokesman to the Lancashire Post newspaper at the time, though he denied it was as much as the 700 million pound ($868 million) reported by the Sunday Times.
With net wealth estimated at 725 million pounds, Hemmings owns Preston North End FC, which plays in the second tier of English soccer, as well as pub company Trust Inns and property investment business Northern Trust Group.
His horses have won the prestigious Grand National race on three occasions.
RBS last year struck an out-of-court deal with four other investor groups, who also accused the bank of omissions and misrepresentations about its financial strength when it launched the 12 billion pound rights issue at the height of the credit crisis.
But the RBoS Shareholder Action Group rejected its share of RBS’s 800 million pound offer.
RBS, which has said it would welcome a deal with the action group, declined to comment on any talks. When asked by Reuters at the end of February, Chief Executive Ross McEwan there had been “some conversations” but no resolution.
RBoS Shareholder Action Group declined to comment, while Signature Litigation, the legal firm representing the claimants, referred requests to the action group.
In a move described by claimants as bullying, the group was forced to reveal the names of its latest third-party litigation funders after RBS asked for details of its After The Event (ATE) insurance while threatening to file an application for security for costs. ATE insurance policies cover the risk of losing and paying the other side’s costs in litigation.
High Court Judge Robert Hildyard last week warned claimants against the “serious consequences” of a funding gap or shortfall. He was also “increasingly troubled” by inconsistent statements about ATE cover and other statements by the group.
The action group has told the court that its current third-party litigation funders include asset recovery and private equity firm Hunnewell Partners (BVI), which says on its website it has a separate and ring-fenced litigation funding business.
Hunnewell, which did not respond to requests for comment, is not listed as a member of the Association of Litigation Funders, an independent body that ensures members abide by a code of conduct and maintains a complaints-handling procedure.
RBS has estimated its legal costs, from the December settlements to the end of the May trial, at 25 million pounds.
Shareholders lost about 80 percent of their investments when RBS collapsed only months after the 2008 cash call, forcing the government to step in with a 45 billion pound-plus bailout.
Former RBS chief executive Goodwin was stripped of his knighthood but kept an annual pension of 342,500 pounds. ($1 = 0.8068 pounds)
(Editing by Keith Weir and David Goodman)