‘So RBS say we are in breach of our loan agreement?’ asks the chairman, looking at me over his glasses in that way he has. We have arrived at that moment when we cease to be ignorant of the finely crafted double-speak involved in dealing with RBS. How, in skilled hands, a loan agreement can become a loan removal agreement; how an ‘arrangement fee’ can become an ex-gratia donation to the bank as things are disarranged; and don’t get me going on the ‘commitment fee’. We paid all these costs and thought them worthwhile for a seven-year €40 million facility from a reputable lender, and it was cheaper than equity — much cheaper. Or so we thought at the time, in our ignorance.
I weigh my words carefully, wondering which bit of the travesty I should dish out to my colleague first.
‘No. They say they could call a breach, but haven’t. It’s as if they are pointing the gun, but not pulling the trigger.’ I can’t help but use similes of threat and violence. RBS is suddenly like a gangster cruising the streets for protection money.
‘Why?’ asks the chairman. It’s a fair question. Because the threat is more powerful than the act. Because they cannot squeeze money out of a dead company. I tell him this, and that the purported breach is a flimsy invention.
‘So, RBS won’t allow any further drawing on the facility, and want us to make repayments instead?’ I confirm this too, and the dire consequences for a business with seasonal cash needs. We have a payroll to meet at the end of every month: three hundred households depend upon it.
‘OK, let me understand this. We asked Edward to discuss changing the repayment schedule for the loan, and he said that in itself constituted a breach? Just the fact of asking to discuss it?’
‘Yup. They cite clause 24.6. Apparently we were “negotiating with a creditor with a view to rescheduling indebtedness”, just by asking for the discussion. That’s an event of default, negotiating with a creditor.’ I explain the sudden importance of the precise definition of the word ‘negotiate’ and the aggressive nonsense of RBS’s interpretation of 24.6, which would put a borrower in breach by simply requesting a meeting with the bank itself. As I said, a flimsy pretext.
‘Doesn’t sound like Edward.’
‘Oh, it’s not Edward any more. We have to deal with a team called the Corporate Recovery Unit. Edward was the nice face of RBS, our relationship man. You should meet Richard, the new guy. He’s a charmer!’ I resist the temptation to liken nice Edward to Dr Jekyll; it would not be fair to Mr Hyde.
For years they have been our main financial partner, but now, dealing with RBS feels like fighting a highly trained army skilful in psychological warfare: the removal of certainties and their replacement with threats, the opaque meanings, the unexplained substitutions of staff — new people well-versed in the dark arts of insolvency, covenants and barrack-room law; the warrior trolls of Orwellian ‘corporate recovery’.
‘And are we? In breach of the contract?’ Another fair question. I am prepared. I have spent some of our dwindling financial resources on getting the definitive answer to this question. Among the hundreds of thousands of pounds that being an unwilling combatant in RBS’s mind-game cost us, the few thousand spent on the top QC were the most satisfying — and the least use. What did RBS care for banking law? Their law was so much more potent. Might is right; diminutive borrowers brandishing their unequivocal written opinions can be brushed away like the naive functionaries they are. ‘We have our own legal opinion,’ says Richard. He doesn’t bother reading ours or showing us his; why would he? He never says ‘Go on then, sue us.’ He doesn’t have to — he knows that since we are a public company, the announcement would kill us quite as surely as if they pulled that trigger. We are complicit with RBS in this non-default default, no one wanting the situation formalised, for our different reasons wanting the company to survive. So without enthusiasm we must start dancing to RBS’s tunes.
‘So, what next?’ asks the chairman. At this stage I do not know what will come. As things unfold I will be amazed at our durability, our ability to meet the challenges RBS has created. I have already been introduced to the sharp-suited team from PwC who will conduct, at our expense, an ‘Independent Review’ of our business; they were cosily sitting in wait with the new RBS team when we were summoned to be informed of our trumped-up misdemeanour. The expense will be great: some of these experts are to be charged to us at £600 per valueless hour as they tap us for the knowledge that will reappear, beautifully presented, in a report to RBS that we will never be allowed to see in full. Our role will increasingly become simply that of the payer of costs arising from this never-declared but always threatened claim of breach. Our poor little company will stretch every sinew. Development plans will be shelved, staff training postponed, marketing costs trimmed, muscle cut along with the paltry fat. Short-term cash will become our only focus. Richard’s bonus depends upon it, I’m sure, and so do those of his many friends who crowd around our struggling little company — a rare British innovator, manufacturer, exporter, employer. An appeal to Ms Eagle, then Secretary to the Treasury, goes unacknowledged.
Later we will learn that RBS was a car crash of a bank and later still the Tomlinson report will tell us that we were merely one of many puny clients being abused and squeezed, in a desperate attempt to patch their self-inflicted injuries, by an organisation bankrupt in more ways than one.
In the end the company does survive. RBS has chosen its victim well; a business strong enough to endure its attentions, attractive enough to find foreign investors willing to fill the ‘equity gap’ the bank created. Damage is done, shareholders are diluted, costs are borne — but the company has rendered up to RBS its demanded tribute. A minute contribution is made to the shrinkage of RBS’s balance sheet and to the profit it extracts from one small loan facility. I move on and so does the chairman. RBS goes bust anyway, of course — its own equity gap of such magnitude that only the taxpayer could ever fill it.