Co-op Bank rescue plan approved

A rescue plan to plug a £1.5 billion black hole in the Co-operative Bank's finances has been approved by a court, the lender said today.

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A rescue plan to plug a 1.5bn pound black hole in the Co-operative Bank's finances has been approved

A rescue plan to plug a £1.5 billion black hole in the Co-operative Bank's finances has been approved by a court, the lender said today.

The decision clears the way for a "liability management exercise" - under which bond holders including US hedge funds will take control of the bank - to be completed by the end of this week.

It comes a day after the troubled lender announced that it had won overwhelming support from investors who were asked to approve the plan.

The bank said in a stock market announcement that the scheme had been sanctioned at a court hearing today.

Bond holders will be given 70% of the business with the current parent, Co-operative Group, left with 30%.

The funerals-to-supermarkets group had initially hoped to retain control of the lender under a planned stock market flotation which would have given owners of bonds a minority stake in return for them pouring £500 million into its turnaround fund.

But it later tore up the plan under pressure from major investors and announced a revised strategy last month which will see the bondholders take control.

The black hole in the bank's finances emerged after the bank's purchase of the Britannia Building Society and abortive attempts to buy hundreds of Lloyds Bank branches.

Some customers have raised concerns over the Co-op Group - which will remain the largest single shareholder - losing majority control. The bank's ethical image has traditionally attracted organisations including trade unions and charities.

But the Co-op has said its values and ethics would be "legally embedded" in the lender's new rules. Peter Marks, former chief executive of the group, has described the fate of the bank as a "tragedy".

Last week, the group announced it had appointed former City minister Lord Myners to lead a review of how the troubled business is run.

It is seeking to restore its reputation following its financial woes and the drugs scandal surrounding former Co-op Bank chairman Paul Flowers.