Mortgage News
Co-operative Bank rescue plans announced; Group’s stake to fall to 30%
The Co-operative Group is set to embark on a restructure which would give it a 30% stake in the Co-op Bank, with 70% given to hedge funds and other creditors.
According to the Financial Times, the mutual plans to give US hedge funds and other institutional bondholders a stake in the bank in exchange for its existing debt.
In a video address to consumers and investors, group chief executive Euan Sutherland said: “I am pleased to announce we have reached an agreement in principle that saves the Co-op Bank. This is as a result of months of work and intense discussions and negotiations with our key stakeholders and investors.”
He said the group had made it a priority to avoid a taxpayer bail-out: “This is the first bank to be rescued and survive as a standalone entity without taxpayer money.”
A second priority was maintaining effective control of the bank, he said: “I’m delighted to say that we have secured 30% of the equity which makes us the single largest shareholder.”
The bank’s constitution would be adapted to include co-operative principles, he added.
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The Co-op Bank must raise £1.5bn before the end of the year in order to meet the Prudential Regulation Authority’s capital requirements.
In addition, it announced this morning it would set aside roughly £100m to fund extra PPI claims, arrears charges and redress to customers who overpaid on their mortgages after a bank error.
The FT report said investors led by US hedge funds Aurelius Capital Management and Silver Point Capital had pushed for more equity. According to insiders, the Co-op was willing to meet those demands.
Further details of the restructuring are expected by October 28.