Co-op to get 30% of bank unit under plan
Print Edition
Britain’s Co-operative Group has detailed a rescue plan for its banking arm, under which it will hand control of the unit to investors including US hedge funds as part of a 1.5 billion pound (US$2.4 billion) bail-in.
In a scheme first set out last month, the Co-op has bowed to the demands of a group of bondholders including US hedge funds Aurelius Capital and Silver Point Capital and agreed to a restructuring which will leave it with a 30 percent stake.
Co-op Bank hit trouble after racking up big losses on commercial property. Many of the bad loans were acquired through its takeover of the Britannia Building Society in 2009 and the bank’s management has been overhauled.
The plan set out yesterday involves Co-op Group contributing 462 million pounds to a recapitalization of the bank, while bondholders will swap their bonds for shares. They will also inject 125 million pounds of new capital.
Co-op Group will remain the bank’s biggest single shareholder. No other single shareholders will have a stake of more than 9.9 percent.
Co-op has also come up with fresh proposals to safeguard the financial interests of its 10,000 retail bondholders, many of whom are pensioners who had relied on coupons from their investments. The plan guarantees investors annual payments for the next 12 years.
Co-op Bank’s new Chief Executive Niall Booker told reporters it could take four to five years to turn around the bank’s fortunes.
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