Hedge funds meet Prudential Regulation Authority to discuss Co-op Bank rescue deal

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Co-op Bank kicked off a sale process in February (Source: Getty)

A group of hedge funds has begun talks with the Prudential Regulation Authority (PRA) over a rescue deal for Co-op Bank.

Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point reportedly met with the PRA last week.

Read more: CYBG on the look-out for deals, but keeps schtum on Co-op Bank

Sky News first reported that the bondholders had argued to the watchdog that the lender needs a smaller injection of funds than was previously indicated.

It emerged earlier this month that the hedge funds had made a proposal to Co-op Bank, with hopes of an outright sale of the bank fading.

In March, Co-op Bank said that if a sale did not to materialise, it would need to raise between £700m and £750m in extra capital.

Read more: Virgin Money walks away from Co-op Bank takeover talks

Most of this amount, it said, would be made by swapping debt for equity. The bank said a further £300m would need to be raised through issuing new shares.

Sky News reported that the hedge funds’ proposal will include the provision of a smaller amount of new equity than the £300m Co-op Bank signalled it would require.

The PRA and Co-op Bank declined to comment.

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