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Continental Breakfast: your daily update on what’s happening in Europe.

The U.K. government’s plans to offload more of its majority holding in Royal Bank of Scotland have been put on hold due to a massive impending fine from the U.S. Department of Justice.

The British government took a 78 percent stake in RBS as part of a 45 billion pounds ($56 billion) bailout in 2008 and sold 5 percent last year at a 1 billion pounds ($1.25 billion) loss.

It had intended to continue to dispose of its RBS shares, but the organization managing the government’s investments in bailed out banks has said that the process is being held up by uncertainty over the DoJ fine.

RBS is one of a number of European lenders targeted by the DoJ over the mis-selling of toxic residential mortgage-backed securities in the run up to the financial crisis.

UKFI chairman James Leigh-Pemberton told a government committee yesterday that the RBS fine could exceed $12 billion. Investor demand for RBS shares is now “not deep enough to enable a sale in any meaningful size,” he added.

Deutsche Bank announced in September that it had been asked by the DoJ to pay $14 billion to settle similar claims. The German lender’s share price crashed over 20 percent on the news, although it rallied weeks later following reports that the pair were close to agreeing a significantly reduced settlement of $5.4 billion.

RBS has a large panel of external legal advisors, including Allen & Overy, Ashurst, Clifford Chance, Linklaters and Simmons & Simmons.

Freshfields Bruckhaus Deringer advised the Bank of England on its bailing out of RBS in 2008, and also acted for the government on its sale of a 5 percent stake in the bank in 2015.

Yet More Exits At KWM

King & Wood Mallesons has lost yet another partner from its struggling European practice, with Munich intellectual property partner Michael Knospe joining Simmons & Simmons alongside a counsel and supervising associate.

It is the latest in a long line of exits from the embattled firm over the past six months.

KWM recently had to halt an $18.4 million recapitalization program following the shock resignation of four senior partners in London, including former managing partner Rob Day and U.K. investments funds head Michael Halford. (Day and fellow corporate partner Andrew Wingfield have now joined the London office of Proskauer Rose, which six years ago held merger talks with KWM’s legacy European arm. Halford and the fourth member of the group, private equity partner Jonathan Pittal, are yet to surface. The pair are still listed on KWM’s website.)

The planned capital injection, which also included salaried partners, was put on hold to allow the firm time to assess the impact of the loss of the four partners’ estimated $11.3 million in annual billings.

KWM’s Asian arm has offered to bail out the firm’s struggling European practice—but only if partners in the region agree to stump up 14 million pounds ($17.4 million) of their own cash and commit to not leaving for at least 12 months.

KWM global managing partner Stuart Fuller last week announced that he will stand down by the end of the year. It leaves the firm with yet another leadership position to fill, having only recently ended its six-month search for a new European management team.

KWM recently held unsuccessful merger talks with Morgan, Lewis & Bockius.

Another Olswang Partner Leaves Following CMS Merger Deal

Another senior partner has left London-based media and technology specialist Olswang following the firm’s agreement to merge with CMS Cameron McKenna and Nabarro.

Olswang’s patent prosecution co-chair Justin Hill is set to join Dentons’ London office as head of its European patent prosecution and opposition practices, reports The American Lawyer’s U.K. sister title Legal Week.

Hill is the second partner to quit Olswang’s intellectual property group since the announcement of the three-way tie-up, which could be joined by a U.S. firm, after life sciences co-head Stephen Reese moved to Clifford Chance last month. Olswang’s restructuring chief Alicia Videon also left in the days after combination was announced to join McDermott Will & Emery.

Olswang partners were forced in early October to sign a lock-in that commits them to staying at the firm for 12 months after the merger goes live in May 2017. Those that refused will have to leave the firm before the combination takes effect.

Contact Chris Johnson at cjohnson@alm.com. Follow him on Twitter at twitter.com/chris_t_johnson