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Co-op bondholders thrown lifeline as bank reviews plans
by Michelle McGagh on Sep 20, 2013 at 17:19
Co-op bondholders have been thrown a lifeline as the bank confirms it will establish an independent board to consider alternatives to its controversial capital rescue plan.
The Co-op has put forward a £1.5 billion rescue plan to shore up its balance sheet. This includes a £1 billion debt-for-equity swap which will see 15,000 holders of permanent interest bearing shares (Pibs) and preference shares forced to switch to a new financial instrument offering a less secure income.
The bondholders, many of who are elderly and use their Pibs interest to top up their income, are furious that they are footing the majority of the bill for Co-op board’s poor decisions.
The bank was due to announce its plan at the end of next month but bondholder groups have called for a separate company to be set up which owns 40% of the bank. Investors would then be given shares in that company so any clawback of money that Co-op manages to make will go directly to the company and into investors’ pockets.
And it now seems that they may be getting a step closer to influencing the Co-op plan, despite the bank stating there was ‘no plan B’.
In a statement to the stock exchange the bank said that ‘an independent committee of the board of The Co-operative Bank be formed to consider third-party approaches in relation to the group’s recapitalisation plan, ahead of the planned launch of the exchange offer in Q4’.
The independent committee will consist of bank non-execuitve chairman Richard Pym, chief executive Niall Booker, and other independent non-executive directors of the bank.
As part of the process Booker will step down as deputy chief executive of the Co-op group.
Earlier today the Co-op bank announced deputy chief executive Rod Bulmer would leave the organisation next year once the fund raising is complete.
Bulmer briefly served as acting chief executive of the bank earlier this year after the previous chief executive Barry Tootell resigned in May after its credit rating was cut to 'junk' by Moody’s.
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On the road
on Dec 06, 2013 at 14:28