RBS 2010 Annual Report Download - page 405

In connection with its participation in the APS, the company has agreed
to a number of behavioural commitments in respect of lending for
businesses in the UK, personal current accounts in the UK as well as to
develop and implement a capital optimisation exercise designed to
increase the Group’s Core Tier 1 capital.
The Tax Loss Waiver
On 26 November 2009, the company entered into three agreements
(together comprising the Tax Loss Waiver) which provide the right, at the
company’s option, subject to HM Treasury consent, to satisfy all or part of
the annual fee in respect of the APS or the Contingent Subscription
arrangement, and the exit fee payable in connection with any termination
of the Group’s participation in the APS (but not the refund of the net
payments it has received from HM Treasury under the APS), by waiving
the entitlement to certain UK tax reliefs that are treated as deferred tax
assets. The Tax Loss Waiver contains undertakings designed to prevent
the Group from engaging in arrangements which have a main purpose of
reducing the net cost to the Group of any waiver of tax reliefs pursuant to
the Tax Loss Waiver.
State Aid Commitment Deed
As a result of the State Aid grantedto the company, it was required to
work with HM Treasury to submit a State Aid restructuring plan to the
European Commission, which has now been approved under the State
Aid rules. The company has agreed a series of measures to be
implemented over a four year period, which supplement the measures in
the company's strategic plan.
The Group entered into a State Aid Commitment Deed with HM Treasury
which provides that the Group will comply or procure compliance with
these measures and behavioural commitments. The Group agreed to do
all acts and things necessary to ensure HM Treasury's compliance with
its obligations under any European Commission decision approving State
Aid to the Group.
The State Aid Commitment Deed also provides that if the European
Commission adopts a decision that the UK Government must recover any
State Aid (a "Repayment Decision") and the recovery order of the
Repayment Decision has not been annulled or suspended by the Court of
First Instance or the European Court of Justice, then the Group must
repay HM Treasury any aid ordered to be recovered under the
Repayment Decision.
The State Aid Commitment Deed also provides for the Group's
undertakings in respect of State Aid to be modified in certain limited
circumstances. However, HM Treasury has undertaken that it will not,
without the consent of the Group, agree modifications to the Group's
undertakings with respect to State Aid which are significantly more
onerous to the Group than those granted in order to obtain the State Aid
approval.
State Aid Costs Reimbursement Deed
Under the State Aid Costs Reimbursement Deed, the Group has agreed
to reimburse HM Treasury for fees, costs and expenses associated with
the State Aid and State Aid approval.
Sale of RBS England and Wales and NatWest Scotland branch based
business to Santander UK plc
On 4 August 2010, the Royal Bank, NatWest Plc and National
Westminster Home Loans Limited entered into a Sale and Purchase
Agreement with Santander UK plc pursuant to which the Royal Bank,
NatWest Plc and National Westminster Home Loans Limited agreed to
sell 311 Royal Bank of Scotland branded branches in England and Wales,
seven NatWest branded branches in Scotland, the retail and SME
customer accounts attached to these branches, the Direct SME business,
and certain mid-corporate businesses and associated assets and
liabilities to Santander UK plc for a premium of £350 million to net assets
at closing. The consideration will be paid in cash and is subject to certain
closing adjustments, including those relating to the performance of the
business. The transaction is subject to regulatory, anti-trust and other
conditions.
RBS Sempra Commodities JV sales
On 16 February 2010, the Group announced that RBS Sempra
Commodities JV, a joint venture owned by the Royal Bank and Sempra
Energy, had agreed to sell to J.P. Morgan Ventures Energy Corporation
(JPMorgan) its metals, oils and European energy business lines. The
Group announced completion of the transaction on 2 July 2010, for a total
cash consideration of US$1.6 billion, post interim distributions of which
the company's share is approximately 47 per cent.
On 20 September 2010, the Group announced that RBS Sempra
Commodities JV had agreed to sell its Sempra Energy Solutions
business line to Noble Americas Gas & Power Corp. for consideration of
approximately US$317 million in cash, plus the assumption of
approximately US$265 million in debt. The Group’s share of the
consideration is approximately 51 per cent, or US$162 million. The
transaction closed on 1 November 2010.
On 7 October 2010, the Group announced that RBS Sempra
Commodities JV had agreed to sell substantial assets of its commodities
trading North American Power and Gas business lines to JPMorgan. The
transaction closed on 1 December 2010 and JPMorgan acquired these
net assets for consideration of US$220 million in cash based on the 30
June 2010 balance sheet, of which the Group’s share is approximately 51
per cent, i.e. US$112 million. The value of the gross assets acquired by
JPMorgan was US$6 billion (unaudited) as of 30 June 2010.
403RBS Group 2010
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