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Co-op Bank unveils details of rescue plan

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The Co-operative Bank has announced the terms of a rescue deal to plug a £1.5bn capital shortfall on its balance sheet.

Under the deal, Co-op Bank bondholders will be “bailed in” by exchanging their bonds for a combination of capital instruments and shares which will give them a “significant minority stake” in the bank.

The so-called ”exchange offer” will invite bondholders to exchange their bonds for a mixture of fixed income instruments issued by the Co-op Group, a fixed income instrument issued by the Co-op Bank, and ordinary shares in the bank.

The exact terms of the offer will be finalised when it is launched, likely to be in October. The Co-op expects more junior bondholders will be offered a greater proportion of bank shares, while senior bondholders will be offered a greater holding of the group instrument.

The Co-op Group is also providing extra capital to help meet the £1.5bn shortfall.

Small retail investors who hold bonds in the Co-op Bank are among those who will be called upon to take part in the exchange offer.

The bank says it is considering whether it can provide independent financial advice to retail investors ahead of the exchange offer being launched. The Co-op says advice would be paid for by the bank.

Co-op group chief executive Euan Sutherland says: “We have put in place a detailed and comprehensive solution to meet the current and longer-term capital requirements of the bank. In doing so we have agreed a plan to ensure its future. We have discussed this plan in full with the regulator.

“The Co-operative Group, which clearly regards the bank as a core part of the group, is providing extra capital. Investors in the bank’s subordinated capital securities are also being asked to support the bank at this crucial time by participating in a wider exchange offer.

“The group is confident that, under the bank’s strengthened management team, this plan offers the best way forward.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. A. Malcolm Barber 17th June 2013 at 9:49 am

    I have been a customer of the Co-op Bank since 1984 because it didnt take risks with my money and was ethical, which made me feel safe, against all other banks my hopes are shot. I have bonds but can I now trust you with my money? I think you will see many people move their accounts as you were always dependable is this another case of banking greed

  2. The solution is quite simple. To plug this shortfall (which will probably turn out to be twice the initial published figure, that’s how these thinks usually work) sell off the more profitable parts of the Coop, and if there isn’t enough from that, let those who lent money to the Coop Bank above the ¬£85,000 protection limit pay the rest. Under no circumstances should taxpayers money bu used!

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