Britain's Biggest Investors to File £1bn Legal Claims against RBS Next Week

Five of Britain's biggest institutional investors are set to haul the Royal Bank of Scotland to court next week, accusing the state-backed lender of misleading them over its £12bn emergency rights issue in 2008.

The investors are expected to claim over £1bn back ($1.7bn, €1.2bn), Reuters reported.

Legal & General, the biggest investor in RBS at the time of the rights issue, Standard Life, Prudential, Aviva and the Universities Superannuation Scheme (USS) are all expected to file claims in London's High Court on 30 April, unnamed sources told the news agency.

30 April marks the sixth anniversary of the publication of RBS's rights issue prospectus, the likely deadline for claims under British law's statute of limitations.

The case could take years to resolve and former RBS boss Fred Goodwin could be dragged to court as the bank's key witness.

The investors have all appointed law firm Quinn Emmanuel and their decision to file lawsuits should take claims related to the money-raising exercise to well over £4bn.

Lawsuits already filed against the bank over the rights issue sue Goodwin, former chairman Tom McKillop and two other former executives.

RBS Fights Back

RBS said it will defend the claims.

The bank said: "While RBS and its former directors made some business decisions that have been criticised, this does not mean that they misled investors or acted illegally."

"We believe we have strong defences to the claims that are being brought against the group and that is why we intend to defend these vigorously and to protect the interests of our shareholders including UK taxpayers."

Leading Investors

L&G, Standard Life and Prudential's M&G Investment Management were among the top 10 shareholders and invested up to £1.2bn pounds in the rights issue, according to Reuters calculations based on holdings at the time.

USS and Aviva Investors were relatively smaller investors, but figured in the top 40.

L&G would have invested about £620m in the rights issue if it took up its rights in full. Given the current value of the shares, it could claim back about £500m after legal costs, according to Reuters estimates.

Standard Life would have invested £360m and M&G would have spent £220m if they subscribed in full for their rights.

RBOS Shareholder Action Group

The RBOS Shareholder Action Group filed proceedings in London's High Court in April 2013, against former executives Goodwin, McKillop, Johnny Cameron, and Guy Whittaker and the bank itself, alleging they were sold shares under false pretences.

While the action group is comprised of mainly of retail investors including pensioners and former RBS workers, over 100 institutional investors who lost money in the 2008 rights issue, are part of the collective action.

In 2008, RBS raised £12bn in its rights issue but was soon bailed out by the government, which has led to investors losing most of their money since then.

RBS received a taxpayer funded £45bn bailout in late 2008 which eventually led it to be 81% owned by the government.