The Co-operative Group is set to retain a 30 per cent stake in Co-op Bank under a new rescue deal, the group has confirmed.
In a video statement, Co-op Group chief executive Euan Sutherland says the group has reached an agreement in principle to save the bank, which is facing a £1.5bn capital shortfall.
The group says the new plan will be “materially different” to the one it set out in June, under which it would retain overall control of Co-op Bank with a 70 per cent stake and the bank would have been floated on the stock market.
Under this plan, Co-op Group would have put in £1bn of the capital needed, with bondholders and owners of preference shares contributing the remaining £500m.
But the BBC’s business editor Robert Peston reported yesterday that bondholders and preference share owners rejected the plan over the weekend, with hedge funds leading the opposition.
Sutherland says: “I’m pleased to announce that we have reached an agreement in principle that saves the Co-op Bank. This is as a result of months of work and intensive discussions and negotiations with our key stakeholders and investors.”
He says the group will embed the bank’s co-operative principles into its constitution, and that Co-op Group has secured 30 per cent of the equity, making it the single largest shareholder.
Co-op Group says further details of the deal will be announced in the coming days.