EMBATTLED mutual Co-operative Group has confirmed it will hand control of its troubled banking arm to a group of powerful investors through a rescue plan that will lead to the closure of about 50 branches.
Euan Sutherland, the group’s Scots-born chief executive, admitted that the survival plans will lead to “significant” job losses, but did not reveal how many of its 9,000 workers are at risk. Reports have suggested 1,000 posts may go.
Bondholders, including US hedge funds Aurelius Capital Management and Silver Point Capital, will be given 70 per cent of Co-op Bank as it tries to plug a £1.5 billion black hole in its balance sheet, leaving the Co-op Group with just 30 per cent.
About 15 per cent of its 324-strong branch network will close by the end of next year, and its corporate banking and call centres will also be scaled back in a turnaround effort that will cost about £500 million.
The lender, with about 4.7 million customers, admitted in August that costs related to its 2009 takeover of Britannia Building Society pushed it to a first-half loss of £709.4m.
Bondholders will plough £125m of new capital into the bank while the Co-op Group – which insisted its values and ethics will be “legally embedded” in the lender’s rules – will inject a further £462m.
Mark Taber, who campaigned for more than 1,700 pensioners and retail investors, said: “This deal has been extremely hard-fought and is now a much better solution.”
Co-op has already sold its life insurance and fund management arms to Royal London for £219m and yesterday said talks continued over the sale of its insurance business.