UK Co-op Group forcing bondholders to plug hole
Britain's Co-operative Group will force bondholders to help plug a £1.5bn (€1.76bn) capital hole, avoiding a repeat of unpopular taxpayer-funded bailouts made during the financial crisis.
Using a "bail-in" rescue model, bondholders will have to swap their debt for new bonds and equity in the bank, which will be listed on the London Stock Exchange.
The Co-op Group, Britain's biggest customer-owned business, will also provide financial support for its banking unit, the Co-op said yesterday.
Europe is pushing ahead with plans to implement a "bail-in" regime that would force bondholders and depositors, rather than taxpayers, to bear the cost of failed banks and the Co-op's approach could become a blueprint for future rescues.
"We have put in place a detailed and comprehensive solution to meet the current and longer-term capital requirements of the bank. In doing so we have agreed a plan to ensure its future," said Co-op chief executive Euan Sutherland.
Co-op Group, which runs supermarkets, pharmacies and funeral services, will retain a majority stake in the Co-op Bank, which has 4.7 million customers. Sources said bondholders are likely to end up with at least a quarter of the bank's shares. Mr Sutherland said he was confident a "good proportion" of bondholders would support the move.