'˜Great outcome for customers' as Co-op Bank secures £700m
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The food-to-funerals Co-op Group’s stake in the bank will shrink to just 1 per cent from the current 20 per cent as part of the refinancing package, with the lender also agreeing to sever itself from the wider mutual’s pension scheme.
The Co-op said its “relationship agreement” between group and the bank – including the promotion of lender services to members of the mutual – will “naturally fall away and come to a formal end in 2020”.
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Hide Ad• READ MORE: Co-op Bank halts sale process amid rescue deal hopes
The lender, which has four million customers, will keep the Co-op branding and confirmed it would continue to keep “values and ethics at its heart”.
The deal will give Co-op Bank the ability to meet regulations on long-term capital requirements, avoid it being wound down and allow it to continue as a stand-alone lender.
Dennis Holt, chairman of the bank, said the proposals “will mean that the Co-operative Bank can continue as a viable stand-alone entity”.
He added: “It is a great outcome for our customers.”
The lender put itself up for sale in February but scrapped the plans in favour of raising capital from existing investors.
Under the refinancing package, it will raise at least £443m in a debt-for-equity swap and a further £250m in new equity from the hedge funds that hold its bonds and shares.
The Prudential Regulation Authority (PRA), which monitors the financial strength of Britain’s banks and insurers, gave the proposals its backing.
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Hide AdA spokesman said: “The PRA has accepted the Co-operative Bank’s plan to build greater financial resilience. Supervisors will remain closely engaged with the bank while the actions announced today are taken forward.”
Trade union Unite said it “cautiously” welcomed the deal. National officer Rob MacGregor said: “Unite is pleased that the future of the bank appears protected as it continues to stand alone rather than being broken up and sold off in pieces.”
As part of the deal to separate itself from the Co-op Group pension, which has around 90,000 members, the lender has agreed to pay £100m over ten years to the scheme and provide £216m in up-front collateral. The Co-op Group said the pension deal will provide security for members.
Co-op Bank almost collapsed in 2013 after the discovery of a £1.5 billion hole in its finances.