The Co-operative Group and Bank have announced the successful completion of their Liability Management Exercise, which they described at the “cornerstone” of the £1.5 billion recapitalisation plan for the bank.
In a statement, the Co-op Bank said it was now confident that the full £1.5 billion requirement will be met in 2014. The announcement follows months of uncertainty after the bank revealed a capital blackhole.
Niall Booker, chief executive of the bank, said, “We have set out a clear strategy, with a smaller, de-risked bank, focused on retail and small and medium sized businesses and we will now deliver that, building on the Co-operative Bank’s heritage.”
In November it was announced that hedge funds would take a 70% stake in the bank and at least 15% of branches nationwide would close. The Co-operative Group remains the single largest stakeholder.
The bank’s bondholders were asked to vote on the recapitalisation plan. At the beginning of this month it was revealed that they had voted “overwhelmingly” in favour.
Euan Sutherland, group chief executive of the Co-operative Group, said, “We have taken a major step forward in securing the future of the Co-operative Bank, with the support of our investors. In putting together this plan, we listened to all our stakeholders and worked to protect the interests of customers and members while avoiding a taxpayer bail-out.”
He added that the group looked forward to working with investors to now strengthen the bank whilst “remaining true to its ethical heritage”.
Whether or not the bank can remain ethical with hedge funds now having a stake has been debated. The bank’s former CEO Peter Marks previously told the Treasury select committee that the hedge funds would create a conflict of interest as they are focussed on profits. Despite concerns, Co-op has maintained that it will stand by its ethical principles.
Last week it was revealed that Lord Myners would lead a review into the governance of the Co-operative Bank, after questions were raised following allegations around drugs.
In the first six months of 2013 the Co-operative Group announced a £559m loss due to the banking division, the bank has since stated that it will be some time before it returns to profits.