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'Smoke signal' that Co-op is backing down on rescue plan

The bank has changed the wording on its website that shows it is thinking about a plan B for bondholders.

'Smoke signal' that Co-op is backing down on rescue plan

Co-op bondholders are expected to be offered a new bond rather than a debt-for-equity swap when details of the £1.5 billion rescue plan are announced soon.

Fixed income expert and head of a bondholder campaign group Mark Taber has been in negotiations with The Co-operative Bank on behalf of investors in permanent interest-bearing shares (Pibs) and preference shares, collectively known as ‘junior’ debt.

Taber is expecting Co-op to release details on Monday 28 October and said there are ‘smoke signals’ that bondholders will receive a better deal than they were originally offered and could see their bonds exchanged for new ones, rather than shares.

Co-op group, the parent company of the bank, was adamant that there was no plan B and it would go ahead with its original plan of exchanging £1 billion of bondholder investments, which pay a regular income, into a new type of share that would pay a less secure dividend.

However, it seems to have backed down from its adamant stance, giving investors hope on it’s FAQ page on the Co-op website under the question: ‘what terms will be offered to holders of the subordinated capital securities under the proposed plan?’

Previously, the answer to the question stated: ‘Whilst the exact terms…will only be finalised at the time of launch…the current expectation of the group and the bank is that more junior ranking [bondholders] are likely to be offered a substantially greater proportion of bank shares.’

The bank, however, has changed its answer to read: ‘We are working on the detail behind this plan. We currently expect to publish an offer document, containing all the detail, in late October 2013.’

Taber is taking this change as a positive sign for bondholders that Co-op is rethinking its plan.

‘It is a promising sign that the Co-op’s plan A has been adapted in line with our alternative proposals for pensioners and retail investors who rely on income from their bonds,’ he said.

‘However, it is disappointing that retail investors have been denied the same access to information and negotiations as all other stakeholders and we trust this means that any offer made to them will be on a voluntary basis and supported by the independent financial advice the Co-op has committed to provide.’

A spokesman for Co-op bank would not comment on whether the bank was backing down on its plan and said the change on the FAQ page of the website was a 'more appropriate answer' for the question posed considering the process that the company is now going through. 'It says we are working through the process and we have said that all along,' he said.

The spokesman could not confirm that an announcement would be made on 28 October and said the company had always aimed towards providing an answer in the fourth quarter of the year.

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3 comments so far. Why not have your say?

arthur death

Oct 18, 2013 at 17:19

time the movement showed their moral stance to the world includes finance,in the meantime we should all stop spending money with them so management realised consumers are their income and therefore profit

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Oct 19, 2013 at 05:47

They are banker, and therefore have no morals. The mutual status of the holding company is simply a smokescreen for obnoxious directors with their snouts firmly in the trough of excessive pay.

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Oct 19, 2013 at 16:08

The co-op seem determined to wipe out the many pensioners who have purchased their PIBs to provide them with retirement income. As these pensioners were often sold these products directly, and can't be regarded as sophisticated investors in any way, why is it down to Mark Taber to fight their corner?

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