Co-op Bank no longer for sale as £750m rescue for stricken lender nears completion

Without a sale, Co-Op needs to raise as much as £750m to avert regulations forcing a so-called resolution, which would mean a fire sale of assets and big losses for creditors

Members of the public walk past the Co-op Bank (Getty)

The Co-operative Bank has halted the process of selling itself as the lender and its creditors discuss a capital increase to rescue the bank.

The proposal would allow Co-op to meet its capital requirements and continue as a standalone entity, the Manchester-based bank said in a statement on Monday.

The parties are in advanced talks over separating the bank’s pension obligations from the Co-op supermarket chain, it said.

Without a sale, the bank needs to raise as much as £750m to avert Bank of England regulations forcing a resolution of the bank. Under that scenario, the central bank would broker a fire sale of assets with steep losses for bondholders.

Co-op Bank bondholders are led by Silver Point Capital, GoldenTree Asset Management, Cyrus Capital Partners and BlueMountain Capital.

The investors want to extricate the bank from its former parent’s retirement plan, shedding pension liabilities for former supermarket workers should the retailer fail, according to people familiar with the matter. The burden of the pensions could make it harder to ultimately sell the lender as a standalone operation in future, the people have said.

Bloomberg