Funds swoop to save bank
Co-op retains just 1% in rescue move
US “vulture funds” have tightened their grip on the Co-operative Bank after a £700million rescue.
The move will mean the Co-operative Group, the funerals to food stores mutual that once owned the bank, will see its stake slashed from 20% to just 1%.
The bank will still be allowed to use the Co-op name but a deal to plug services to group members will end in 2020.
Co-op Bank bosses claim the rescue, which will see bondholders swap debts they are owed for a bigger stake in the lender and inject new money, will help it “thrive as a standalone entity”.
Chief executive Liam Coleman said keeping its four million customers loyal was “absolutely crucial going forward”.
Chairman Dennis Holt tried to allay fears it would change after hedge funds up their stake, saying the ethics of the co-operative movement are “embedded in its DNA”. The bank’s investors are believed to be Wall Street financiers Blue Mountain Capital Management, Silver Point Capital, Cyrus Capital Partners, GoldenTree Asset Management and Anchorage Capital Group.
Holt denied they were “vultures” – the name given to funds that snap-up distressed assets – insisting there were “long term investors”. He added that there was “no gun to our head” to recoup the money for the funds.
The Co-operative Bank nearly collapsed in 2013 when an attempt to buy 632 branches from Lloyds revealed a £1.5billion black hole in its coffers.
It then emerged the bank’s then chairman Reverend Paul Flowers, nicknamed the “Crystal Methodist” due to drug taking allegations, had only “very basic” banking knowledge.