Royal Bank of Scotland to buy back bonds

Royal Bank of Scotland has offered to buy back as much as $6.4 billion of bonds to reduce its cost of funding as it shrinks global operations.

The Edinburgh-based lender wants to buy about £1.9 billion of sterling debt, €1.3 billion of securities and $2.1 billion of US dollar bonds.

RBS said the purchase price will be set on November 25th and will “reflect a yield to maturity” to compensate bondholders for cashing out now.

RBS doesn’t require the same level of funding for operations as chief executive officer Ross McEwan divests assets and eliminates thousands of jobs to help overturn seven straight annual losses.

Retiring excess debt may help reduce the cost of running the business, while also returning cash to bondholders. The bank is managing its “overall liability composition and mix for value,” RBS said in a statement. “It considers future interest expense with reference to its balance sheet, whilst maintaining a prudent approach to liquidity and costs,” it said.

RBS’s liquidity coverage ratio (LCR), a measure of high-quality assets, rose to 136 per cent at the end of September from 112 per cent at the end of 2014 as the lender shrank its balance sheet, according to company filings.

The Bank of England requires major British lenders to have an LCR of at least 80 per cent.

- Bloomberg