The Co-operative Bank says it's in "advanced discussions" over capital raise

The Co-op provided the update today
The Co-op provided the update today (Source: Getty)

The Co-op Bank said today that it was in “advanced discussions” with existing investors over a capital injection.

However, there remain questions over the fate of its joint pension scheme shared with Co-operative Group, which currently owns a 20 per cent stake in the lender.

In a statement, Co-op Bank said: “The bank notes recent media speculation and confirms that it is in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise.”

Read more: Co-op Group could reduce stake in Co-op Bank to less than five per cent

Sky News later reported that the trustees of Co-op Group’s retirement scheme have demanded fresh details of the deal arrangements and have so far withheld their backing.

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.

Hopes of finding an outright buyer have faded in recent months, with a group of bondholding hedge funds – Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point – seeking to tie up a deal.

The bank nearly collapsed back in 2013 but was bailed out by US hedge funds. In February it put itself up for sale and in April, the group wrote off its 20 per cent stake in the bank.

The Co-op Bank added that the formal sale process continues, and the bank continues "to fully discuss both the sale process and the capital raise options" with the Prudential Regulation Authority, which it said has welcomed the sale and capital raise process.

A further update will be made "when appropriate", according to the Co-op.

Earlier this month, it emerged that Qatari investment company Al Faisal Holding and Switzerland’s Interritus Limited, advised by Barclays, had held talks about buying Co-op Bank.

This remains an unlikely outcome though, with the group of hedge funds able to stand in the way.

After the bank put itself up for sale in February, in March it 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 while a further £300m would need to come from issuing new shares.

Read more: Qatari and Swiss companies in talks to bid for Co-operative Bank

Related articles