Meet the team:

Bywaters is a long established family run recycling and waste management company based in London and dating back to 1952.

Bywaters previously banked with Allied Irish Bank GB with whom they had entered into two Interest Rate Swaps (“the AIB Swaps”). The Swaps were costly to service and would cost Bywaters over £1.6m to break.

In 2011 RBS/NatWest seduced Bywaters by offering to resolve the AIB Swap issues and provide additional loan monies so that Bywaters could expand. Bywaters made the mistake of transferring its borrowing to RBS. Prior to the move, Bywaters instructed RBS that if they novated the Swaps from AIB they must not be exposed to additional costs and risk. RBS understood the instruction and engineered a plan that they alleged would benefit Bywaters. RBS simultaneously novated and then broke the Swaps across in May 2011 so that Bywaters could enter into a new consolidated Swap with RBS for over £13m.

It immediately became apparent to Bywaters that the servicing costs of the RBS Swap were higher than the AIB Swaps. Moreover, within 3 months RBS confirmed that the break fee of the RBS Swap had doubled to £3.2m.

During the “seduction” by RBS they offered to assist Bywaters to find an internal accountant and a solicitor to “smooth the progress” of the move, however Bywaters suspect that this was a reconnaissance for RBS to gain an understanding of the business and its assets.

Due to financial difficulties linked to the servicing costs of the RBS Swap, RBS transferred Bywaters to its GRG division in November 2012. Thereafter, RBS instructed KPMG (at the cost of Bywaters) to prepare an Independent Business Review. The content of this review was disputed by Bywaters as it reported an exaggerated negative financial position and contained, what Bywaters allege to be, false damaging assertions of its business viability.

Bywaters only realised the true effect of the transfer to GRG in August 2013 when their Managing Director, John S Glover made written enquiries to Ross McEwan and Philip Hampton, the Chief Executive Officer and Chairman of RBS. As a result of the complaint Bywaters was referred to the Birmingham GRG centre and RBS began to increase the pressure on Bywaters. GRG more than doubled the interest rates charged on the £13 million of debt and this was in addition to the enormous payments under the RBS Swap. RBS also refused to allow Bywaters to use their own collateral to pay down the debt, stating that there was no collateral left after RBS had unilaterally downgraded the value of Bywaters freehold properties to £14 million. This appeared to be a “planned” devaluation.

Bywaters received several offers to refinance with other major financial institutions, however, RBS would not permit Bywaters to move until they had repaid the entirety of the debt which was impossible by virtue of the cost of inflated interest rates and the increased breakage fee of the RBS Swap.

In July 14 RBS informed Bywaters that they planned to sell their debt (from Bywaters) as part of a book of loans as they had been categorised as RCR. This meant Bywaters had been removed from RBS’ balance sheet and written off as “bad loan”.

However, unbeknownst to RBS at that point HSBC had already agreed to refinance Bywaters and resolve their issues. As such Bywaters were eventually able to refinance away from RBS, however, they still paid significant breakage and servicing costs in respect of the RBS Swap that far exceeded those that would have been payable had they retained the original AIB Swaps.

More information

See more on Bywaters in our blogs and press.

Watch the Channel 4 News report including an interview with Bywaters and berg’s Alison Loveday here.

Meet the team: