Co-op investors close to getting financial advice

Tim Wallace
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SMALL bondholders in the Co-op Bank could receive financial advice, paid for by the bank, within weeks, City A.M. understands.

The lender is concerned its reputation as an ethical and upstanding bank is being damaged by the crisis around its capital levels.

But it has struggled to reassure worried investors as it is taking several months to piece together its plan for a rescue package.

The bank has a £1.5bn capital hole to fill, with the burden expected to be split between the Co-op Group – paying £1bn – and investors – paying £500m.

Part of the burden will fall on retail investors holding junior bonds, who will be offered new bonds in the group and shares in the bank. Overall the package is expected to amount to losses of around 30 per cent for those retail investors.

Two of the instruments affected are perpetual retail bonds issued in the 1980s and 1990s, and often held by pensioners as they pay out divideds every year.

The Co-op estimates 7000 investors are affected, while a campaign group made up of bondholders believes the truer figure is nearer 15,000.

The bank pledged to offer those investors free financial advice on the bail in deal.

Campaigners have argued this is impractical and expensive, as it involves tailoring advice to thousands of individuals.

Mark Taber, a fixed income investor who formed the campaign group, has argued it would be cheaper for the bank to offer investors cash instead of going through arranging financial advice.

But the group expects to have the advice available as soon as next month.

It is understood it has to wait until the full offer is near completion before it can offer the advice, but hopes to be able to do so around the time of the lender’s half year results in August.

Currently the only guidance for investors comes from an online microsite with a list of frequently asked questions and staff available on the phone.