UK's Co-operative details bank rescue plan

Mon Nov 4, 2013 8:09am EST
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By Matt Scuffham

LONDON (Reuters) - Britain's Co-operative Group CWSGR.UL has detailed a rescue plan for its banking arm, under which it will hand control of the unit to investors including U.S. hedge funds as part of a 1.5 billion pound ($2.4 billion) bail-in.

In a scheme first set out last month, the Co-op has bowed to the demands of a group of bondholders including U.S. hedge funds Aurelius Capital and Silver Point Capital and agreed to a restructuring which will leave it with a 30 percent stake.

Co-op Bank hit trouble after racking up big losses on commercial property. Many of the bad loans were acquired through its takeover of the Britannia Building Society in 2009 and the bank's management has subsequently been overhauled.

The plan set out on Monday involves Co-op Group contributing 462 million pounds to a recapitalization of the bank, while bondholders will swap their bonds for shares. They will also inject 125 million pounds of new capital.

Co-op Group will remain the bank's biggest single shareholder. No other single shareholders will have a stake of more than 9.9 percent.

Co-op has also come up with fresh proposals to safeguard the financial interests of its 10,000 retail bondholders, many of whom are pensioners who had relied on coupons from their investments. The plan guarantees investors annual payments for the next 12 years.

"This deal has been extremely hard fought and is now a much better solution for retail holders and pensioners," said Mark Taber, who had campaigned on behalf of retail investors.

Co-op Bank's new Chief Executive Niall Booker told reporters it could take four to five years to turn around the bank's fortunes.   Continued...

A red crossing light is pictured next to a branch of the Co-operative Bank in London October 21, 2013. REUTERS/Luke MacGregor