Pensioners and retail investors are facing delays for payments on Co-operative Bank permanent interest bearing shares sparking fears they may not be paid in full.
The Prudential Regulation Authority is not allowing the bank to pay out on bonds until it has a credible rescue plan in place after it revealed a £1.5bn capital shortfall in April due to bad commercial loans from the Britannia Building Society.
Pibs are shares issued by building societies which pay a fixed rate of interest and can be traded on the London Stock Exchange. Britannia Building Society issued the Pibs before it was taken over by the Co-op in 2009.
Interest payments for perpetual subordinated bonds paying 13 per cent interest were scheduled for 31 July but will now be deferred until November when they are set to be exchanged for shares in the bank. The Co-op says, assuming the exchange is successful, it will pay interest on the Pibs “in full and in cash”.
The Co-op bondholders action group branded the move “very cruel” blaming the Co-op and PRA for delays and cast doubt over whether investors will be paid in full.
Jacksons Wealth Management managing director Pete Matthew says: “If I was a bondholder I would be working out how to live without that income.”