How Co-op may be downgraded if reforms falter

Tim Wallace
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TROUBLED Co-operative Group could lose its credit rating if it does not turn itself around, ratings agency analysts warned yesterday.

Its reformist chief executive Euan Sutherland quit this week after failing to win over opponents on the group’s board.

Sutherland will not be replaced until Lord Myners has completed his review of the mutual’s structure.

The aim is to allow the next chief executive to take over a more well organised business.

However, that will only happen if the existing board allows it to – a group of more than 20 elected directors, some of whom proved hostile to Sutherland’s management.

Ratings agency Standard and Poor’s reiterated its view that the top of the group is in turmoil.

“We assess the group’s management and governance as “weak.” This assessment captures our view of recent governance deficiencies, substantial turnover in several key roles in top management, and the strategic and financial missteps that led to the recapitalisation of the Co-operative Bank,” said the ratings agency’s analysts.

It comes after Standard and Poor’s warned the group’s B-plus rating will be at risk if it cannot turn around its food business – something retailer Sutherland had been recruited to achieve – and if poor financial management worsens.

Similarly it is at risk if its insurance sales and capital-raising plans fail to materialise.

The group’s credit rating has already been knocked down one notch because of the poor governance, something which Sutherland’s departure may worsen.