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Co-op Bank: regulator stops coupon on 13% Pibs
Investors in the Co-op's 13% bond will not receive an interest payment this month after regulators stopped the coupon
Investors in the Co-operative Bank’s 13% permanent interest-bearing shares will not receive a coupon at the end of the month, after the regulator vetoed the decision.
Investors in the Co-op's 13% Pib were due an interest payment on 31 July but this has been deferred until November while the bank prepares to swap bond holders into new investments.
This is designed to provide £1 billion of the £1.5 billion new capital the Co-op Bank needs to recover from lending losses and to comply with new rules by the Prudential Regulation Authority.
The bank's capital shortfall was exposed in May when ratings agency Moody’s downgraded the Co-op to 'junk status'.
The £1 billion will be raised by swapping junior debt into new financial instruments that are yet to be finalised.
In a statement to the stock exchange, Co-op said it could only pay coupons with permission from the PRA and today ‘that such permission, after full consideration by the PRA, has not been granted in respect of the discretionary coupon payment on the 13%...bonds scheduled on 31 July’.
Co-op added that the interest payment ‘will be deferred and will be paid at the time of, but conditional on, the successful completion of the exchange offer’.
It said: ‘All investors in the 13% bonds including those investors who tender their 13% bonds in the exchange offer, will receive the deferred interest payment, in cash, on successful completion of the exchange offer expected in November.’
Investors in the 5.5555% Co-op Pibs received a coupon, which they can keep, just before the ratings downgrade.
Both 5.555% and 13% bondholders have seen the value of their investment plummet since May. The 5.5555% Pibs was trading a 75p in the £1 in May and the 13% was trading at 150p; the value has now fallen to 40.75p and 62p respectively.
A protest group of 1,300 Co-op bondholders has called on the PRA to explain why it is forcing the bank to undergo what it describes as 'punative' measures.
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