Following a four-year journey, the Co-op Group has fully offloaded its remaining stake in the Co-operative Bank, leaving the financial institution with zero co-operative ownership.
The Group sold 80% of its shares to hedge funds in 2013 as part of a stock market flotation to rescue the Bank following the discovery of a £1.5bn capital hole. Its remaining 20% was reduced to 1% on 1 September as part of a £700m rescue package to recapitalise the Bank. That final 1% has now been sold off.
In August, creditors behind previous rescues of the Bank swapped their debt for equity. In a move approved by 90% of members, the Bank was left in the control of five hedge funds – BlueMountain Capital, Cyrus Capital Partners, GoldenTree Asset Management, Anchorage Capital, and Silver Point Capital.
As a result of the recent rescue package, the Group lost its right to nominate a director to the Bank’s board. In its interim results, the Group recognised £nil income from its 20% stake in the Bank for the 26 weeks ended 1 July 2017 (2016: £45m loss) and confirmed it had since sold its entire remaining 1% shareholding to an existing shareholder for £5m. This profit will be included in the Group’s full annual results for 2017.
Speaking on BBC Breakfast, Steve Murrells, Co-op Group chief executive, said that while the Group played a “key part” in the future of the Bank over the summer, it was now “up to the Bank to show it can continue with its ethical stance that it has had in the past”.
“The Bank is well run and well maintained and its ‘co-operative’ name is observed by independent adjudicators and the minister,” he said, adding that selling its 1% share would allow the Group to “focus on other areas” – including the organisations’ shared pension scheme (Pace).
““As The Co-operative Bank (‘the Bank’) went through an exercise to secure additional capital, we successfully set in motion plans to separate our pension scheme arrangements while protecting the interests of our members, investors and current and former colleagues,” wrote Allan Leighton, Co-op Group chair, in the Group’s interim report.
As part of the new arrangements, the Group has agreed on principles to split the total pension liabilities of Pace and to remove the Bank’s obligation to support the Group’s share of the Pace pension scheme liabilities. The Group says it will see the relationship agreement between the Group and Bank “naturally fall away and come to a formal end in 2020”.
- The Co-operative Bank has also appointed a new chief financial officer to take over from John Worth who is leaving following the Bank’s successful restructuring and recapitalisation. Subject to regulatory approvals, Tom Wood, who is already a director of the bank, has been promoted to the role and will continue with his responsibilities as the chief restructuring officer.