ABN AMRO postpones RBS asset split-off

ABN AMRO postpones RBS asset split-off

Geneva: Nationalised Dutch bank ABN AMRO postponed the legal separation of some assets owned by Royal Bank of Scotland, setting back a key step in its restructuring to months past what it had initially expected.

The bank said it now expects the separation - part of the process of merging it with the local operations of Fortis before a planned flotation - to occur at the earliest in the first quarter of 2010 instead of by the end of this year.

An ABN AMRO spokesman said the process was complex and had never been tried before, which is why the bank could not meet its long-held original target for completing the separation.

RBS did not return a call seeking comment.

In 2007 a consortium that included Fortis, Santander and RBS acquired ABN AMRO with the intent to split it up. But before the allocation of RBS’s pieces could be completed, the Dutch state nationalised ABN in October 2008.

The legal separation of the RBS-owned, ABN-controlled assets is part of the government’s overall restructuring plan for the bank, which it plans to merge with also-nationalised Fortis Bank Nederland and then privatise in 2011 or later.

“It is envisaged that the legal demerger will take place in the first quarter of 2010 followed by the legal separation within two months (after that)," ABN said in a statement.

The legal demerger is the process by which the state-owned assets are transferred to a newly created bank entity and the remaining entity is renamed Royal Bank of Scotland NV.

The legal separation is the process by which the shares of the new state-owned bank are transferred from ABN AMRO Holding into full state control.

ABN said in a separate statement the group is in compliance with capitalisation and liquidity requirements and the group’s shareholders would ensure adequate capital and liquidity levels for the banks once split.

The Dutch finance ministry warned in June that it may need to pump more money into the ABN assets it owns when they are split from the group. It increased ABN’s capital by 2.5 billion euros at the time.

Another hurdle

The delayed separation is the latest hurdle for ABN AMRO, which has been torn and tossed for more than two years but ABN reiterated the merger with Fortis Bank Nederland would continue.

ABN and Fortis Bank Nederland need to sell some assets before the Dutch government is allowed to integrate them, after a European Commission order on preserving competition in the Dutch small and medium enterprise banking market.

Fortis holding struck a deal in July 2008 to sell some assets, including commercial bank HBU, to Deutsche Bank AG.

When the Dutch government nationalised Fortis’s local operations in October 2008, it inherited the EU competition order. It subsequently tried to negotiate with Deutsche Bank to avoid a loss of 300 million euros on the original terms.

The government received three extensions on the talks, but they collapsed last month. The EU subsequently gave the government another extension to 2 October to find a new deal.

However on 2 October the EU granted one last extension up to 19 October, citing the “imminent" sale of HBU and the other assets that Deutsche Bank was originally slated to buy.

The Dutch government now says it is once again talking to Deutsche Bank about a deal, but sources familiar with Deutsche Bank’s thinking have cautioned a deal was by no means certain.

Wednesday’s news on the delayed separation came in a statement related to a consent solicitation on 1 billion euros of 4.31% perpetual capital securities.

ABN is offering 1 euro per 1,000 euros principal amount of the securities for consent to change the contracting party to the state-owned business.