Co-op Bank confirms £700m rescue package
The Co-Operative Bank has confirmed a £700m rescue package from hedge funds to keep the “ethical” bank running.
The hedge funds involved in raising the £700m capital include BofA Merrill Lynch, UBS Investment Bank and Houlihan Lokey.
In February the bank announced it had put itself up for sale but would be considering offers to help raise capital.
The bank will recapitalise some of its bonds to generate £443m of capital including a separate cash offer to certain retail holders.
A group of existing noteholders have also proposed to raise of £250m of new equity as a last resort option.
The rescue package includes an agreement on the future structure of the shared Co-Operative Pension Scheme including the need to provide security for its scheme members.
The Co-operative Group has agreed a plan with the pension scheme trustees to separate the respective sections of the scheme and remove the bank’s obligation to support the Group’s shared pension scheme liabilities.
However, the bank has agreed a recovery plan for the bank section of the shard pension scheme, where it will contribute £100m over 10 years as well as provide initial collateral of £216m from the point of sectionalisation.
The group’s shareholding in the bank will fall from 20 percent to around one percent.
The relationship agreement between the group and bank, which includes the promotion of bank services to members of group, will come to a formal end in 2020.