Page 11 - RBS GRG F Case Study

If the customer ‘s business continued to seriously
deteriorate then SRM, in consultation with GRG would

pass it on to GRG which would apply a range of financial

tools each of which would incur a financial cost to the
customer.

The customer was in effect transferred to GRG’s

subsidiary, known as ‘West Register’ where the customer

would be required to either agree a Property

Participation Fee Agreement (PPFA) and/or would require

new shares to be created and sold to West Register for a

pittance. (12,15)

The PPFA was essentially a contract on a new loan which

provided for a return or payment from the Bank’s

customer, and which was linked to the value of the

customer's asset(s) a commercial property (or properties)
and/or an equitable stake in the business. The customer

could be instructed to sell off assets to pay down the
loans to get the LTV rate below the new rate, which varied

between 50% and 65%. PPFA allowed the Bank to secure

large participation in the value of customers’ assets. A

business would usually be offered a new loan, with

extortionate and often complex fee structures.