More than 600 holders of Co-op Bank preference shares and subordinated bonds have asked campaigner Mark Taber, who runs the Fixed Income Investments website, to look into the bank’s attempt to plug its capital hole.
The Co-op needs to raise £1.5bn and last week announced it could plug part of the deficit by ‘bailing-in’ bondholders – swapping their debt for a mixture of equity and new bonds issued by its parent company, Co-operative Group, before the bank is listed.
About £500m of the £1.5bn needed to meet the regulator’s capital safety rules could be raised this way.
The investors have asked Taber to investigate whether they are getting a rough deal under the terms of the capital raising.
The Co-op’s need to raise capital could lead it to withdraw quietly from the mortgage market, a senior analyst said earlier this month.
SVM Asset Management managing director Colin McLean said: “Regarding mortgages, the Co-op is going to be under big pressure to shrink its balance sheet so it is going to try quite hard not to roll over loans.
“As for making new loans, there is no incentive for it to do that at all. It just doesn’t have the capital for it.”
