Co-op Bank secures £700m rescue package
Updated : 12:59
The Co-operative Bank - which almost collapsed back in 2013 due to a £1bn black hole in its finances - has managed to secure a £700m rescue package.
The cash will be stumped up by hedge funds and other investors, leaving the Co-op Group with just a 1% interest in the bank. The deal, which has been approved by the Prudential Regulation Authority, will allow the bank to continue as a standalone entity and meet regulatory capital requirements in full "in the medium term".
Around £443m of the capital will come from an ad hoc committee of existing bondholders through a debt for equity swap, with £250m from a new equity raise.
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. It is a great outcome for our customers. Our investors share our commitment to building our distinctive ethical franchise and see strong future growth potential for The Co-operative Bank."
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."
Rob MacGregor, national officer of the Unite union which represents staff at the Co-operative Bank, cautiously welcomed the news.
“Throughout this challenging period, the bank staff have continued to show their professionalism and commitment to the Co-operative name. Unite is pleased that the future of the bank appears protected as it continues to stand alone rather than being broken up and sold off in pieces. It is vital to the workforce that the Co-operative’s name, ethics and values will be safeguarded.
“Unite will be meeting with the chief executive this week to seek assurances on what the deal will mean for our members in the long term, including job security assurances and pension protections.”