Co-op Group’s stake in its namesake bank could be slashed to less than five per cent under a rescue deal tabled by a group of hedge funds.
The bondholding hedge funds, Co-op Bank and the group remain in negotiations but sources have said a deal announcement could be made within the next week.
Co-op Group owned 100 per cent of Co-op Bank prior to a previous restructuring in 2013 and currently holds 20 per cent.
Sky News first reported that the shareholding could be reduce to less than five per cent. It also noted that there are a number of issues which require resolution, including the fate of the joint pension scheme and issues around the Co-op brand.
However, it is understood that this remains an unlikely outcome, with the group of hedge funds – Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point – able to stand in the way.
Co-op Bank put itself up for sale in February and in March said it would require a capital injection of between £700m and £750m. Most of this, it said, could be raised through swapping debt for equity and that a further £300m would need to come from issuing new shares.
Hopes of finding an outright buyer gradually waned, and the ad hoc hedge fund consortium is in talks with the Bank of England’s Prudential Regulation Authority as it works towards a deal.