Regulation  

Co-operative Bank secures rescue funding

Co-operative Bank secures rescue funding

The Co-operative Bank has confirmed that a recapitalisation arrangement has been agreed between the bank and existing stakeholders, to avoid being wound up.

The agreement to secure the long-term future of the bank sets in motion plans to raise around £700m of additional CET1 capital, which will ensure the Co-operative is able to meet all regulatory capital requirements. 

A total of £250m of new equity will be raised following a proposal of Tier 2 noteholders, while £443m of CET1 capital will be raised through the recapitalisation of Tier 2 bonds.

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The latter will be made possible through the support of 47 per cent of Tier 2 noteholders and 52 per cent of shareholders.

The debt-for-equity swap with hedge funds means that the Co-op Group's stake in the bank will fall from 20 per cent to about 1 per cent.

The bank’s plan to separate the Co-operative Pension Scheme from the banking arm of the business will go ahead.

Support for an equity capital raise and recapitalisation proposal from an ad hoc committee of existing Tier 2 noteholders, the AHC, having been confirmed.  

The Co-op Bank has been been struggling for four years since an abortive attempt to buy 632 branches from Lloyds revealed a £1.5bn hole in its finances.

Dennis Holt, chairman of The Co-operative Bank, 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."

A spokesperson on behalf of the AHC 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."