Co-op bows to bondholder pressure over rescue plan
THE Co-operative Bank has admitted its £1.5bn rescue plan will be “materially different” to the one outlined in June.
The statement followed reports that bondholders had succeeded in blocking the original proposal and have won the argument for a debt-for-equity swap that would give them a majority stake.
In June the Co-op put forward a strategy to raise £500m from asset sales, £500m from the Co-op Group and by forcing £500m of losses on the £1.3bn of subordinated bondholders.
It would then be floated on the stock exchange, with the parent group retaining a 70% stake. But this plan depends on bondholder approval. According to the BBC the Co-op Group has conceded defeat and a new deal will be finalised in the coming weeks that will see the bondholders taking control. The opposition has been led by the hedge funds, Silver Point and Aurelius, advised by investment bank Moelis.
In a statement it said: “We currently expect that many elements of any recapitalisation plan will be materially different to the outline provided on 17 June 2013, whilst still meeting the additional £1.5bn Common Equity Tier 1 capital requirement. The plan continues to evolve through the process of consultation and negotiation with bondholders, therefore we cannot provide further detail at this stage.
“Constructive engagement with bondholders is continuing and group remains confident that a proposal to recapitalise the Bank can be agreed and put to bondholders. We will make a further announcement when appropriate.”
It followed an earlier statement today that said the bank expects to pay out a further £100m on compensation claims over the sale of payment protection insurance (PPI).
