Scots bank offers early medicine

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The Independent Online
THE ABILITY or willingness of UK clearing banks to nurture their ailing corporate clients through hard times has been fiercely questioned as the tide of corporate receiverships has risen. But not all banks are the same, writes Alison Eadie.

A recent study by the Forum of Private Business showed the Scottish clearers outscoring their English competition in almost every category, including interest margins, helpfulness of bank managers and negotiable charges. The Royal Bank of Scotland hopes to take a further leap ahead of the pack with its new approach to companies in difficulty.

Its specialised lending services operation, set up in November last year, aims to catch companies with trading problems early, so those problems do not run out of control and land them in the bank's intensive care ward. Significantly, the three leading players in the new unit are not bankers.

Its director, Derek Sach (pictured at right), is an equity man with 20 years at 3i group, latterly as managing director for UK investment. His right- hand men are Donald Workman, also once of 3i but more recently in BES investments, and Bill Samuel, a property specialist.

The approach of the specialised lending unit is 'not one that clearing banks would traditionally have taken', Mr Sach said. It includes taking minority equity stakes in companies. 'If the bank takes an equity risk, it is looking for an equity return.'

It also involves rejigging company structures and encouraging management change. Many companies in trouble have made an identifiable mistake - one acquisition too many or one property too big, Mr Sach said.

A typical case could be a company that has a viable core business, but which was being dragged down by an overambitious property acquisition in the late 1980s. 'We could ring-fence the property by putting it into a separate company to protect the trading entity,' said Mr Sach.

The specialised lending services operation, which also deals with the bank's intensive care cases, has 300 staff based in London, Manchester and Edinburgh. The goal is to avoid receivership by all means possible.

(Photograph omitted)