Co-op Group’s debts ‘could lead to collapse’

The chartered financial analyst and founder of London-based consultancy CooperCity, said the group’s disastrous results for 2013, which were published last week and revealed a £2.5bn loss, meant it would have to reduce its debt to stave off bankruptcy.

According to Ms Cooper, this means it would therefore not be able to participate in the raising of an additional £400m at the bank.

She said: “The assumption is that enough investors will be found to stump up the £400m even if the group cannot afford to participate, but if these external investors do not, the bank is likely to go bust and the Co-op Group faces more losses.”

Her comments followed reports that the independent inquiry by Sir Christopher Kelly, launched last July to investigate the events which led to the near collapse of the bank, will blame poor governance and a lack of due diligence concerning the takeover of the Britannia Building Society.

The report by Sir Christopher, the former chairman of the Financial Ombudsman Service, is expected to be published next week. A spokesman for the Co-operative Bank and the Kelly Review declined to comment on the leak.

Meanwhile, Paul Flowers, the former chairman of the Co-op Bank, was charged last week with possession of class A and class C drugs relating to an incident on 9 November 2013, and will appear at Leeds Magistrates’ Court on 7 May 2014.

Adviser view

Graham Evans, director of Somerset-based Western Financial Planning, said: “The Co-op Group seems to be stuck between a rock and a hard place – if it were to participate, it could be a question of good money after bad, but if it doesn’t get involved it could lose all the money it has ploughed in.”