RBS today announced a senior debt buy-back, including £1.9bn in sterling, $2.1bn in dollar and €1.3bn in euro senior notes, amounting to £4.6bn in total, or around 38 per cent of the company's total issued senior debt.
A debt buy-back allows the holders of the debt, or notes, to exchange it for cash, allowing the company to effectively pay-off the debt.
The bank's UK debt due date ranges from 2017 to 2028 and the €1.34bn euro notes outstanding from an initial debt issue of €2bn, are due in 2017. The combined $2bn in debt matures in 2020 and 2021.
RBS said it would set the purchase price on November 25, and the bank will buy-back at a small premium to compensate bondholders for cashing out early.
The long-term reduction in interest payments will outweigh the initial loss associated with the buyback, and help the bank reduce the cost of its funding, as RBS currently has a funding excess.
In a statement the bank it was looking to “manage its overall liability composition and mix for value," considering "future interest expense with reference to its balance sheet whilst maintaining a prudent approach to liquidity and costs.”
The tender offer will end at 4pm on 24 November.