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Britain's struggling Co-op Bank says in rescue talks with investors

19 June 2017

The Co-operative Bank has confirmed that it is in advanced talks with existing investors about a possible rescue, amid reports that the Co-operative Group is concerned about a mooted £200m pension deal.

That leaves the United States hedge funds that own 80% of the bank, Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point, to structure a rescue.

An agreement over the pensions arrangement is necessary for approval of the remainder of the USA hedge funds' rescue plan for the Co-Op Bank.

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The lender added that discussions are also ongoing regarding the separation of the Co-op Group pension scheme, which would clear the path for a takeover.

"The bank notes recent media speculation and confirms that it is in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise", the lender said.

Meanwhile, the bank said that as well as exploring potential recapitalisation it was also proceeding with its sale process.

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When it offered itself for sale, the Co-op Bank blamed low interest rates and the higher-than-expected cost of its turnaround plan for its failure to meet the Bank's Prudential Regulation Authority (PRA) rules.

In April Co-op Group declared its 20% share of the lender worthless by writing down its entire value to zero, even though it continued discussions with other investors to save the business.

Sources said that the Co-operative Group, which now owns a 20 per cent stake in the bank, was demanding a more robust financial package to protect the 90,000 members of their joint retirement scheme.

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Since failing the Bank of England's stress test in 2014, Co-op bank has been closely watched by regulators while it tries to restore its capital to an acceptable level.

Britain's struggling Co-op Bank says in rescue talks with investors