RBS nears end of road for AT1 debut

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By Alice Gledhill

LONDON, Aug 5 (IFR) - Royal Bank of Scotland (LSE: RBS.L - news) is close to issuing a debut Additional Tier 1 capital, one of the bank capital market's longest-awaited capital raisings, after it began actively marketing to investors on Wednesday morning.

The dollar-denominated transaction comprises two tranches: a perpetual non-call five-year and perp non-call 10 with investors being canvassed at the 7.75% area and 8.25% area respectively.

RBS is the last of the major UK banks to issue a bond in this format and the timing of the deal capitalises on a positive set of results last week.

It is also coming in the same week that the UK government reduced its stake in the bank from 78.3% to 72.9% - a legacy from a £45.8bn bail-out at the height of financial crisis.

Bankers said that positive momentum, and a healthy concession, should see strong demand from investors.

"On an absolute level it's one of the most attractive things you can buy," said one debt banker.

Expected ratings for the bond are B(S&P)/BB-(Fitch. The deal is expected to price later on Wednesday.

The bonds will convert into equity if the bank's CET1 ratio drops below 7%. That ratio saw an 80bp rise to 12.3% between March and the end of June and is likely to receive a further 200bp-300bp boost from the exit and deconsolidation of US bank Citizens (NYSE: CIA - news) , to be completed this year.

The bank, which met investors in the US and London earlier this week, is running its own deal as global coordinator and structuring adviser.

Bank of America Merrill Lynch, Credit Suisse (NYSE: CS - news) and Morgan Stanley are joint leads for the trade.

(Reporting by Alice Gledhill; editing by Alex Chambers)