Co-op hails 'major step forward'

The Co-op today hailed a "major step forward" in securing the future of its embattled banking arm as it announced the completion of the main plank of its £1.5 billion rescue plan.

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The Co-op Group said it has taken a major step forward in securing the future of the Co-operative Bank

The Co-op today hailed a "major step forward" in securing the future of its embattled banking arm as it announced the completion of the main plank of its £1.5 billion rescue plan.

A move to exchange £1 billion of bonds for new shares in the lender, after a black hole was discovered in the bank's finances, has now been completed.

Much of the rest of the money will come from the parent Co-operative Group, which will remain the main shareholder with a 30% stake.

But it will cede majority control to bondholders including US hedge funds - in a move that has raised concerns among some customers concerned for the future of its ethical approach.

Today's announcement comes days after investors voted overwhelmingly in favour of the plan and it was approved by a court.

Co-op Group chief executive Euan Sutherland said: "Today we have taken a major step forward in securing the future of the Co-operative Bank, with the support of our investors."

Richard Pym, chairman of the Co-operative Bank, said: "With our balance sheet strengthened, I and the rest of the board will be working with our rejuvenated management team to ensure that we continue to provide customers with an alternative choice to the traditional banks.

"Importantly, The Co-operative Bank's ethics and values will be protected, both in the bank's constitution and via an independent ethics committee."

The bank said it would seek to list new shares on the Stock Exchange within a year.

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

Last week, the wider 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.