Virgin Money has walked away from a deal to buy Co-op Bank after months of speculation linking the lender with a move.
Sky News reported that Virgin Money, led by Jayne-Anne Gadhia, informed Co-op Bank in recent days that discussions were being terminated.
Co-op Bank now looks set to advance in talks with a group of hedge funds, led by GoldenTree Asset Management and Silver Point, about a financial restructuring.
Co-op Bank kicked off a sale process, run by bankers from UBS and Bank of America Merrill Lynch, in mid-February.
In early April, the bank announced it had received a “number of non-binding proposals from strategic and financial parties”.
It also said it had “selected several parties to enter a further phase during which these parties will be provided with additional information”.
This month, it has appeared less and less likely that a conventional buyer would be found.
Virgin Money and Co-op Bank declined to comment.