Co-op Bank to look at rescue options

Reuters
A taxi passes a branch of the Co-Operative Bank in central London
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A taxi passes a branch of the Co-Operative Bank in central London June 17, 2013. REUTERS/Luke MacGregor

LONDON (Reuters) - The Co-operative Bank (LSE:CPBB) will assess alternatives to a 1.5 billion pound rescue plan independently of its parent the Co-operative Group (CWSGR.UL), it said on Friday.

The bank will set up a committee which will include Richard Pym and Niall Booker, chairman and chief executive of the Co-op Bank, and the bank's independent non-executive directors.

The committee is in the process of appointing Greenhill as its financial advisors and the bank will retain Linklaters as its independent legal advisors.

A group of bondholders on Monday put forward an alternative plan for filling the lender's capital hole, seeking a bigger equity stake than proposed by the Co-op in its rescue plan.

The bondholder group, advised by investment bank Moelis & Co, said it had attempted to talk with the bank over the past three months but said a conflict of interest between the group and the bank "prevented substantive engagement".

The group has submitted a different recapitalisation plan to Co-op Bank's board of directors on behalf of institutions owning about 43 percent of the bank's lower Tier 2 bonds. Its proposal, a debt-for-equity swap, attempts to squeeze better terms out of Co-op Group and potentially give bondholders majority ownership of the bank.

A source familiar with the matter said Co-op Group had not received any other alternatives other than the Moelis-led proposal. The group has said there is "no Plan B" to its proposal, and warned if bondholders do not agree the plan the bank could be nationalised, leaving investors with nothing.

Co-op Bank, which has 4.7 million customers, hit trouble after racking up big losses on commercial property. In June the Co-op Group unveiled a plan to raise the money from asset sales, bank loans and slicing the value of bonds.

(Reporting by Matt Scuffham; Editing by Laura Noonan and Elaine Hardcastle)

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