Co-operative bank bondholders ask regulators to revaluate debt deal

Co-operative bank bondholders ask regulators to revaluate debt dealBondholders of the co-operative bank have asked the regulator to revaluate the £1.5 billion rescue package for the bank.

Under the plans, the bondholders will be given new bonds for their existing debt and a gap of £1.5 billion will be filled in the equity. According to estimates, the bondholders would lose about £500 million but the finalised proposal is yet to be published by the bank. Bondholders have been critical of the regulator for adopting a punitive approach to addressing the bank's problems.

Co-operative Bank PLC, which is a part of the Co-operative Group Ltd, has said that it will raise fresh capital this year by offering holders of its £1.3 billion in subordinated bonds a mix of new senior debt and shares. The decision would impact about 5,000 small investors who have bonds or permanent interest bearing shares (PIBS) in the bank. The bank had issued bonds to raise funds to acquire the Britannia Building Society in 2009.

The bank has asked subordinated bondholders to take loses on their investments in an effort to raise £1.5 billion in fresh capital and prevent its collapse. The bank is also expected to raise further £500 million by selling loans from its portfolio and selling its general insurance unit in 2014. The bank needs £1 billion to fill the gap in its finances and the management is also considering cutting or cancelling income paid to the bond holders of the bank.