Co-op Group’s stake in Bank could be cut to less than 5%, say reports

The speculation follows reports that a group of hedge fund bondholders are the leading contenders in the race for a rescue deal of the Bank

As work continues on a rescue deal for the Co-op Bank, reports suggest the Co-op Group’s stake could be cut to less than 5%.

Sources say a deal could be announced within a week as the Group continues talks with the Bank and the hedge funds who hold the majority of the stake.

Co-op Group owned 100% of Co-op Bank until a crisis sparked by the takeover of Britannia led to a restructure in 2013. In February this year, the Bank announced it was up for sale and, in March, said it needed a capital injection of £700m-£750m.

The Group currently holds 20% and in May wrote down the carrying value of its stake to nil. Now, Sky News has said that shareholding could drop to below 5%.

Related: Paul Gosling’s analysis of the Co-operative Bank

And the report said there were other problems to overcome, including the fate of the joint pension scheme and issues around the Co-op brand.

The speculation follows news last week that Qatari investment company Al Faisal Holding and Switzerland’s Interritus Ltd have held talks about buying the Bank and were taking advice from Barclays.

They were said to be attracted by the Bank’s ethical credentials and were interested in a long-term investment.

However, a group of hedge funds which hold bonds in the Bank – Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point – can block a Swiss Qatari deal.

The hedge funds met the Prudential Regulation Authority last month to discuss a deal, and analysts say this remains the likeliest outcome.

A spokesman for the Co-operative Group declined to comment on the latest speculation but said it remained supportive of the Bank in its efforts to strengthen its capital position.


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