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Royal Bank of Scotland looking at debt restructuring

It has been revealed that the Royal Bank of Scotland is looking to restructure its debt pile with potentially £10 billion of the bank's £28 billion debt likely to be brought back by the company and refinanced using other financial instruments. It is understood that directors of the Royal Bank of Scotland have been studying the Lloyds bank model, which saw the company reduce its debt by £10 billion, as well as a similar operation undertaken by Dutch group Rabobank just last week.

There is a growing belief within the UK investment markets that a reorganisation of the Royal Bank of Scotland balance sheet is required in the short term to enable the company to look further ahead and at least try to grow in the future. Various state aid regulations and agreements in place with the UK government effectively allowed the company to be rescued after teetering on the brink of collapse but now these same agreements appear to be holding back progress in expanding the operation into the future.

Quite how any restructuring of the balance sheet will affect equity holders, with UK taxpayers holding around 70% of the shares, remains to be seen but this short-term pain could eventually lead to a long-term gain for the company, the UK economy, taxpayers and shareholders.

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