Investors pay price as Co-op Bank rescue deal concludes

CO-OPERATIVE Bank has completed the £700m rescue deal agreed with its US hedge fund owners, seeing its retail investors take heavy losses but helping shore up its capital position as it attempts to revive profits.

Co-op Bank agreed the restructuring and recapitalisation plan, under which it is receiving £250m of new equity and raising £443m from a debt-forequity swap, in June.

The rescue deal was orchestrated by five hedge funds – Anchorage Capital Group, Blue Mountain Capital Management, Cyrus Capital, Goldentree Asset Management and Silver Point Capital. All but Anchorage were part of the lender’s 2013 bailout.

Under the latest plan it has cut historic ties with the Co-operative Group. Under the 2013 deal the group’s 100pc ownership was cut to 20pc. In the new deal, the Co-op Group’s stake in the lender fell further to 1pc and the “relationship agreement” between the pair also came to an end.

Retail investors were dealt a heavy blow under the latest plan, receiving less than half of their initial investment, at 45p in the pound, and being paid entirely in cash. Co-op Bank said it had “made arrangements” for these investors to be paid.

Institutional investors, meanwhile, received a smaller proportion of their initial investment, at around 15p in the pound, but were given the payment in shares.

Dennis Holt, the Co-op Bank’s chairman, said: “Our focus as we move forward will be to return the bank to a position of sustained profitability and to realise our potential as the UK’S leading ethical bank.”

Co-op Bank has posted an annual pre-tax loss each year since 2011.