Wow... is this scary or what? So last week, RBS sold 2B in new bonds @ ~5% yield, at the same time that the EU is telling them to stop paying on their already existing obligations. Get new capital, drive up the price on the ordinary shares, and bail on preference shares and junior bonds(leaving fixed income individuals holding the bag while institutions get a nice ride).
I had missed this story, but find it very interesting. Anyone else miss this?
Comments anyone? So RBS sells 2B in bonds New Issue-Royal Bank of Scotland sells $2 bln 5-yr note Tue Aug 18, 2009 3:51pm EDT
Email | Print | Share | Reprints | Single Page [-] Text [+] More News Royal Bank of Scotland Plc sells $2 bln 5-yr notes Tuesday, 18 Aug 2009 03:48pm EDT
Aug 18 (Reuters) - The Royal Bank of Scotland Group plc on Tuesday sold $2.0 billion of five-year notes in the 144a private placement market, said IFR, a Thomson Reuters service.
RBS was the sole bookrunning manager for the sale. BORROWER: THE ROYAL BANK OF SCOTLAND GROUP PLC AMT $2.0 BLN COUPON 4.875 PCT MATURITY 8/25/2014 TYPE NOTES ISS PRICE 99.702 FIRST PAY 2/25/2010 MOODY'S Aa3 YIELD 4.943 PCT SETTLEMENT 8/25/2009 S&P A-PLUS SPREAD 250 BPS PAY FREQ SEMI-ANNUAL FITCH AA-MINUS MORE THAN TREAS NON-CALLABLE
These are five year notes (I believe non-callable). What is disturbing to me is that RBS is getting fresh capital while contemplating not paying on existing obligations. It seems to me that the EU is in favor of leaving preferred holders out in the cold. I called RBS and asked them why they are not getting with the EU and putting this deferment issue to rest. RBS IR was not at all forthcoming.
If European banks stop paying on preferreds and junior debt, it will undermine confidence. One would think banks and the EU would not want this uncertainty swirling around.