The Co-op Bank is to pay £15m to City advisors brought in to find it a buyer, it has been reported – even though it has opted for a bailout from existing investors instead of a sale.
A Sky News report said that Bank of America Merrill Lynch (BAML) and UBS, who were appointed in February when the Bank put itself up for sale, would be paid between £15m and £20m.
It added that this will include a “success fee” despite the fact that they did not secure a sale of the Bank to a third party.
Instead, a £700m rescue package has been put in place, with investors swapping their debt for a stake in the Bank.
The Sky report claims there is “consternation” among other parties involved in the restructure about the size of the fees being paid to BAML and UBS, who are not taking on any financial risk through their roles in the Bank deal.
It says the hedge funds agreed to rescue the Co-op Bank to avoid their previous investments being wiped out and the Bank of England moving in to wind it up.
They will suffer a substantial reduction in the value of their holdings, adds Sky, paying £250m for new shares and swapping £443m of existing debt for equity.
The report claimed an insider had said the success fee was negotiated on the basis that it would be paid in all circumstances other than the Co-op Bank falling into a resolution process led by the Bank of England.
Spokespeople for UBS and BAML said they were not commenting on the reports. The Co-op Bank has not responded to a request for comment.