Co-operative Bank may have to turn to existing investors for more funds as hopes of a takeover fade.
The bank’s backers could take control of the business, which is currently 20 per cent owned by Co-operative Group, if no final bids are submitted ahead of a Friday deadline.
Banks including CYBG and Virgin Money have been linked with bids for Co-op Bank, but no final offers are thought to have been submitted yet. Both declined to comment.
And with hopes fading, it is thought the lender’s shareholders and bondholders, largely made up of hedge funds, could offer a debt-for-equity swap. The lender has previously highlighted the possibility of a “liability management exercise”.
Co-op Bank announced in mid-February that it had kicked off a sale process run by bankers from UBS and Bank of America Merrill Lynch.
Early last month, the lender revealed it had received “a number of non-binding proposals from strategic and financial parties” and that it had “selected several parties to enter a further phase during which these parties will be provided with additional information”.
Co-op Bank said that each of the “preliminary offers included some form of liability management exercise”.
It also said there was no certainty an offer could be agreed and that an “equity raise and/or a liability management exercise of its outstanding public debt” could also be considered.
The Sunday Times first reported that, in the event that no takeover offers go through, bankers from Houlihan Lokey are expected to be appointed to oversee the financial restructuring.
Co-operative Bank declined to comment.