Co-Operative Bank Plc hired the former chairman of the U.K.’s Financial Ombudsman Service, Christopher Kelly, to lead a study into its need for 1.5 billion pounds ($2.3 billion) of new capital.
Kelly will investigate the decision to merge the lender with Britannia Building Society in 2009 and the proposed acquisition of 632 branches from Lloyds Banking Group Plc (LLOY), Manchester, England-based Co-Op Bank said in an e-mailed statement today. He will start in September and report his findings in May.
The Co-Op Bank said last month it will swap some debt for equity and trade on the London Stock Exchange to raise money. The customer-owned lender is seeking to raise 1 billion pounds by asking existing bondholders to exchange subordinated debt for new equity and senior debt, with 500 million pounds more gained through the sale of insurance assets.
“As we move forward with implementing the detail of this plan, it is important to learn from the past,” Co-Op Group Chief Executive Officer Euan Sutherland said in the statement.
Co-Op Bank didn’t specify Kelly’s compensation for the review.
The bank today said it won’t pay interest due July 31 on its 13 percent perpetual subordinated bonds after failing to get permission from the Prudential Regulation Authority. Payment of the coupon will be deferred until after bank completes the capital plan, expected in November, it said in a statement.
Separately, a group of bond investors hired investment bank Moelis & Co. to advise them on Co-Op’s capital increase, the Wall Street Journal reported today, citing two people it didn’t identify.
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