Britain's Co-op Bank agrees $900 million rescue package
Britain's Co-op Bank agrees $900 million rescue package
Co-op Bank drops plans for a sale amid £700m rescue package plan
28 June, 2017, 17:59
Co-op Bank chairman Dennis Holt said: "The board is pleased to confirm this proposal for a recapitalisation which will mean that the Co-operative Bank can continue as a viable stand-alone entity, with values and ethics at its heart".
The lender, which is majority-owned by United States hedge funds, put itself up for sale in February but scrapped the plans in favour of raising capital from existing investors.
The Co-operative Group will be left with just a 1% stake in the Co-op Bank after a deal was clinched with hedge funds and other investors to pump £700m into the loss-making lender.
Rob MacGregor, national officer of the Unite union which represents staff at the Co-operative Bank, cautiously welcomed the news.
Co-Op Group's stake in the bank will fall to 1 percent from about 20 percent, meaning it will lose the right to nominate directors to the company and the promotion of the bank's services to its customers will "come to a formal end in 2020", according to the statement.
The deal will give Co-op Bank the ability to meet regulations on long-term capital requirements, avoid it being wound down and allow it to continue as a stand-alone lender.
The bank and parent Co-operative Group have agreed terms to separate their respective pension plans, overcoming a stumbling block after months of negotiations with investors as to who would be liable for the members' pensions.
The bank, which has 4 million customers, said the rescue deal would enable it to continue as a stand-alone business. "They've supported this bank through very hard times, and they are continuing to support us now that we've built strong foundations to take it further forward".
Meanwhile, a spokesperson for the ad hoc committee of bondholders said: "We have supported the turnaround of the Co-operative Bank since 2013 and this further investment will provide the bank with the capital needed to realise its potential as the UK's leading ethical bank".
Earlier this year, the bank reported its fifth annual loss of £477m deficit for 2016.
It was saved by a consortium of USA hedge funds but has been unable to earn itself back to health since then.
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