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Co-op Bank secures rescue deal

Source BBC News@

co-op bank signCo-op Group will hold just a 30% stake in the bank under the terms of its rescue deal

The Co-operative Bank is set to give details of its rescue plan later after securing a deal over the weekend, the BBC has learned.

The deal will see creditors to the group - led by a half dozen hedge funds - end up with 70% of shares in the bank, leaving Co-op Group with 30%.

It could also mean some 1,000 job cuts and the closure of 15% of branches.

BBC business editor Robert Peston said barring unexpected disasters, the bank's future had been secured.

The move follows the discovery of a £1.5bn hole in its balance sheet caused by bad loans and the 2009 merger with Britannia building society.


Our correspondent says the Co-op Group hopes to protect the co-operative culture of the bank, by writing a pledge only to do what it sees as ethical business into the bank's principles or articles of association.

He says it has taken the unusual step of communicating this change to the bank's constitution to its five million customers in newspaper adverts - to reassure them that the hedge funds will not and cannot turn it into just another bank.

Also what may comfort others is that the rescue deal represents a big bank being saved without taxpayers having to put in a penny, he added.

Two weeks ago the mutual group said it would lose overall control of the Co-op Bank following a restructuring of a rescue deal, which will provide the bank with extra capital.

In June, the Co-op Group announced a plan to plug a £1.5bn capital hole in Co-op Bank's balance sheet.

The group intended to put in £1bn of capital itself, with £500m coming from bondholders and owners of preference shares.

The bank would then have been floated, with Co-op Group holding a 70% share. However, the bank's creditors, led by US hedge funds, rejected the plan.

Đăng ký: Tieng Anh Vui

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