By Simon Miller
The Royal Bank of Scotland (RBS) has ditched a £129m sale of bonds backed by its own derivative trades after investors rejected its complexity according to reports.
The deal, called Score, was cancelled in February after potential investors rejected the idea after being hit by losses on other exotic debt.
Money put up by bondholders would have been used to reimburse RBS if customers failed to pay on the £2bn book of derivatives trades. If there was no default bondholders would receive their money back plus 15% or so interest.
The cancellation shows RBS misjudged the appetite for securities constructed like those that led to the 2008 financial crisis, sources told Bloomberg.
Although RBS described deals such as Score as a "key tool" to build capital after its government bailout, investors burned by about £262bn of losses on subprime-backed collateralized debt obligations remain wary of intricate vehicles that promise outsized returns, the people said.