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Co-Op Bank scraps sale process as rescue plan nears

27 June 2017

The Co-operative Bank has abandoned talks over a sale after edging closer to clinching a deal with hedge funds to stump up millions of pounds to bolster its financial position.

As a result, the loss-making lender is now majority controlled by USA hedge funds.

The trustees have been insisting that Co-op Bank bondholders commit to funding a newly sectionalised Bank pension scheme over a multi-year period.

The group said then that was continuing to pursue a sale process.

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The Bank's intension is to remain a standalone operation in order to safeguard the Co-operative's values and ethics.

That deal means that each side commits to standing behind the other's pension liabilities if it fails.

The Bank also confirmed that it had terminated talks with a Qatari-Swiss consortium to focus on a rescue package provided by its existing bondholders, who also own most of its shares.

Recently, Sky News suggested the Group's stake could be cut to less than 5% as part of the restructure.

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According to the Co-operative the negotiations to re-fund the bank are at an advanced stage, with the majority of the key commercial aspects of the recapitalisation proposal "substantially agreed".

Earlier this year, it reported its fifth annual loss in a row, although the £477m deficit for 2016 was an improvement on the £610m loss recorded in 2015.

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.

The ethical bank has never recovered from its near-collapse in 2013, when U.S. hedge funds including Cyrus Capital Partners, GoldenTree Asset Management, Silver Point Capital and Blue Mountain stepped in to plug a £1.5bn black hole in its finances.

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Co-Op Bank scraps sale process as rescue plan nears