Co-op Bank closing in on rescue deal with investors
● Black hole saw lender almost go to the wall in 2013
The Co-operative Bank, which was put up for sale in February, has said that it is in advanced discussions with existing investors over a rescue package.
The bank said yesterday that the talks centre on a “prospective equity capital raise and liability management exercise”.
The lender added that discussions are also ongoing regarding the separation of the Co-op Group pension scheme, which would clear the path for a takeover.
Reports had surfaced over the weekend that the struggling lender is close to announcing a £700 million deal that would see it dodge being wound down.
“The bank notes recent media speculation and confirms that it is in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise,” the lender said in a statement.
In March the bank, which has some four million customers, said its ability to meet longer-term UK bank regulatory capital requirements had been hampered by low interest rates and higher than anticipated transformation and “conduct remediation” costs.
Co-op Bank almost collapsed in 2013 after the discovery of a £1.5 billion black hole in its finances and it was forced into a painful debt-for-equity swap. As a result, the lossmaking lender is now majority controlled by US hedge funds. The Co-operative Group owns just 20 per cent of the bank that bears its name.
The lender added yesterday: “The bank continues to fully discuss both the sale process and the capital raise options with the Prudential Regulation Authority (PRA), which has welcomed the sale and capital raise process.”
In April, the Co-operative Group fell into the red for the first time since 2013 after writing off the value of its stake in the lender.
The mutual slumped to a pre-tax loss of £132m for 2016 after the value of its holding in the bank was slashed from £185m in 2015 to zero.
The latest figures revealed that group revenues increased by 3 per cent to £9.5bn, with like-for-like takings at the food division lifting 3.5 per cent, driven by its core convenience business.
Membership numbers rose to four million after the group relaunched its reward scheme and it has signed up a further 350,000 so far in 2017. Chief executive Steve Murrells, who replaced Richard Pennycook, said the group backed the Coop Bank sale proposals. Sushi chain Yo! is returning to Glasgow city centre this month with the opening of a flagship branch in West George Street. The eatery, which is marking its 20th anniversary this year and is known for its conveyor belts delivering food to diners, said the 72-cover restaurant is due to open its doors on 29 June. Yo! previously had a branch within the city’s House of Fraser department store and has other outlets nearby at the Braehead and Silverburn shopping centres.