According to the UK government, Abu Dhabi investors can invest up to £5bn in RBS stock, which is approximately equivalent to a 14% equity stake.
The remainder capital will be infused as contingent capital, funds that would be available under pre-negotiated agreement, which could convert from debt to equity on a pre-agreed basis, according to media reports.
The stake sale is expected to be finalized by 2013, after the approval from UK government and shardeholders.
According to an estimate, the UK taxpayers who own 82% of the bank, would lose almost half of their investment on any sale near current prices. The shares are trading at barely half the UK Government’s average purchase price of 50p.
UK Financial Investments (UKFI), which holds the Treasury’s stake, is engaged in talks with the investors about their views on the industry and RBS stake sale.
In 2008, Britain undertook a record bailout when taxpayers infused £45.5bn into RBS and saved it from financial crunch. Any deal could see at least 10% and up to 33% of the government’s stake sold.
A treasury spokesman said the government’s policy has always been to return RBS to the private sector but only when it delivers value for money for the taxpayers.
