Jermey Warner's Outlook: Surely not. RBS rights saved by hedgie

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The Independent Online

Saved by Christopher Hohn, the hedgie who runs The Children's Investment Fund (TCI)? This really would be an exquisitely appropriate outcome for Royal Bank of Scotland's £12bn rights issue, which as Friday's deadline for acceptance approached looked to be in some danger of being left with the underwriters.

Whether the rumours of stakebuilding by TCI in RBS are true or not – they were being downplayed by RBS yesterday – they helped put a rocket under the RBS share price, which over the past couple of weeks has been creeping ever closer to the 200p-a-share strike price for the rights. When announced six weeks ago, this was a deep 46 per cent discount to the stock market. What could go wrong?

Undermined by heavy short-selling from Mr Hohn's Mayfair peers in the hedge fund community, the shares have been falling ever since, and what seemed initially like a completely riskless underwriting was beginning to look as if it would leave participants earning their fee after all.

Mr Hohn's intervention would be laced with irony, not just because it would undermine the shorting strategy of rivals at a crucial moment, but also because he was the fund manager who helped to deliver ABN Amro into RBS's hands, and, by provoking RBS into overpaying, brought on much of its present trouble.

If Mr Hohn's intention is to ferment another break-up, he may have chosen the right target. Capital needs alone have already forced RBS to put its insurance and other peripheral assets up for sale. Why stop there? A more ruthless break-up, forcing RBS to dispose of its expensively acquired US and wholesale banking interests, would make some sense and might lead to a quite considerable short-term recovery in the share price.

The story of Mr Hohn's involvement is almost too good to be true. Having made one fortune by getting Sir Fred Goodwin to overpay, he'd make it all over again by forcing him to pay the price of his own folly. Coming just ahead of decision time for the rights issue, it also looks mighty suspicious. Still, you don't need to be as clever as TCI to realise that RBS is horribly oversold. Underwriters are also rallying round to save the rights issue with some concerted buying. As usual, Mr Hohn didn't return requests for comment. Now there's a surprise.