RBS shapes up

ICG has become the latest investment firm to benefit from the bank’s programme of sales, picking up a €1.4bn portfolio of leveraged loans.

UK government-owned bank The Royal Bank of Scotland has undergone an extensive exercise of shedding non-core businesses as a way of improving liquidity and capital reserves. In August Intermediate Capital Group became the latest firm to capitalise on the sell-off, when it agreed to buy a portfolio of leveraged loans with a par value of €1.4 billion. 

A spokesman for ICG described the loans as being mostly “Western European and triple-A companies [ICG] conducted diligence on for the past several months”.

RBS said the sale was “in line with the group’s strategy to reduce its funded balance sheet and exposure to its existing leveraged loan book within its non-core division”. 

The transaction comes amid recent EU rulings which have forced the bank to dispose of a number of other noncore businesses. In the last few months, the bank sold its metals, oil and European energy business lines to JP Morgan for $1.7 billion. It offloaded 318 RBS branches to Spanish banking giant Santander, a deal originally eyed by private equity firm The Blackstone Group and British medical foundation The Wellcome Trust.

In August, Boston-based private equity firms Advent International and Bain Capital would play their part in the restructuring, agreeing to acquire RBS WorldPay, the bank’s card payment subsidiary business, for an enterprise value of up to £2.025 billion (€2.43 billion; $3.24 billion).

Government-owned RBS would retain a minority stake of 19.9 percent in WorldPay, with Advent and Bain evenly splitting the remainder, according to a source familiar to the deal. Mezzanine finance to the tune of $470 million was provided by a consortium of lenders comprising Kohlberg Kravis Roberts’ KKR Asset Management, mezzanine specialist TCW/Crescent Mezzanine and Bain Capital affiliate Sankaty Advisors.

RBS produced a net profit of £9 million for the first six months of the year, an improvement from the loss of £1.04 billion in the first half of 2009.

In reaction to the bank’s return to the black, RBS chief executive Stephen Hester described the group’s five year restructuring strategy as back “on track”, but that there was “plenty left to do and we may slip up as the race is not yet run”. At any rate, the bank may find that race easier to finish with its new lean image.