LONDON: Britain’s Co-operative Bank is close to agreeing a rescue package with the Bank of England that will plug a capital shortfall of up to £1.5bn ($2.35bn) without state help, according to a source familiar with the matter.
The deal, which could be announced early this week, will primarily involve a bail-in by bondholders and support from the rest of the Co-operative Group, but will avoid assets sales other than those already announced, the source said yesterday.
The additional funding would “plug a shortfall of between £1bn and £1.5bn”, the source said.
The Sunday Times newspaper said that more than 5,000 small investors could see as much as 30 percent of the money they lent to the bank, in securities called permanent interest bearing shares, wiped out or transferred into a new vehicle, citing insiders.
The Co-op, Britain’s biggest mutual business which also runs supermarkets, funeral services and pharmacies, has until the end of June to agree a plan with Britain’s financial regulator to fill a capital shortfall at its bank. Analysts had said the hole could be as much as £1.8bn.
The Co-op Group has installed a new top team of chief executive Niall Booker, finance chief Richard Pennycook and chairman Richard Pym to steady the bank, which saw its credit rating cut to junk status by Moody’s last month.
The Co-op has already agreed to sell its life insurance business to Royal London for 220 million pounds and has put its general insurance business up for sale.
Reuters
