Embattled Co-op Bank insists credible suitors are coming forward
CO-OPERATIVE Bank has insisted that it has several “credible” suitors, and dismissed speculation that bidders face a looming deadline to make initial offers for the loss-making lender.
The bank put itself up for sale last month amid mounting concern about its deteriorating capital position.
But after a host of potential buyers, including TSB’s Spanish owner Sabadell, Secure Trust and Metro Bank, all publicly ruled themselves out in recent days, fears are growing that there are few bidders for the lender.
If the Bank of England cannot secure a rescue, it will be forced to step in and wind the business up, marking the first intervention at a financial institution since the failure of Dunfermline Building Society in 2009. The Bank is already closely watching the lender in case a rescue is not forthcoming.
Co-op Bank, in an effort to assuage concerns that a sale had stalled, said yesterday that since inviting bids, “a number of credible strategic and financial parties have expressed interest in the sale process and are currently evaluating information on the bank”.
It is understood that the “strategic” suitors include two trade bidders, CYBG, the owner of the Clydesdale and Yorkshire banking brands, and Virgin Money, while the “financial” groups include private equity firms.
Once proposals are in, Co-op Bank said it would hold a second bidding round “where selected parties will be provided with additional information in order to continue their due diligence with a view to making an offer for all of the issued ordinary share capital of the bank”. It warned, however, that “there can be no certainty” an offer would be made.
Many industry insiders believe that while there might be bidders for parts of the lender, it will struggle to find a suitor willing to buy it in its entirety. The bank’s subordinated bonds fell to fresh lows yesterday after its update failed to reassure debt investors.
Its bonds have plunged this week amid rumours that potential buyers faced an April 4 deadline to submit initial offers. This rattled debt investors concerned the bank faced a “cliff edge” at the start of the next month.
Co-op Bank sought to play down suggestions that there was a hard deadline, saying that it “has requested that preliminary expressions of interest should be submitted in the first half of April”.
As well as seeking a buyer, the bank is working on an alternative plan to raise £750m by forcing its bondholders into a debt-for-equity swap and tapping up investors for £300m in fresh equity.
The lender almost collapsed in 2013 after discovering a £1.5bn black hole in its finances, but was rescued by a group of US hedge funds. Last month, Co-op Bank posted a £477m loss for 2016, its fifth consecutive year in the red. Its problems stem from its takeover of the building society Britannia in 2009.