Co-Op Bank Says Prepared to Engage Bondholders on Restructuring

Co-Operative Bank Plc said it’s willing to engage with creditors proposing an alternative recapitalization plan as it seeks to raise 1.5 billion pounds ($2.3 billion).

The U.K. lender, which is being pushed by regulators to bolster capital after incurring losses following its 2009 acquisition of Britannia Building Society, was responding to proposals from Moelis & Company UK LLP, which is advising a group that owns 43 percent of Co-Op’s lower Tier 2 bonds.

Bondholders said they want all of the bank’s subordinated bonds and preferred stock converted to common shares. Co-Op Bank plans to raise 500 million pounds by exchanging subordinated debt for equity and another 500 million pounds from the sale of senior debt issued by the parent Co-Operative Group Ltd., which is also offering to put in another 500 million pounds from the sale of insurance interests.

“It’s good to see the Co-Op is willing to engage,” said Mark Taber, who represents a group of holders of the Manchester-based lender’s preferred shares. “It’s very useful to have a credible alternative to management’s plan on the table. It shows an alternative exists.”

CLS Holdings, a U.K. property company which holds 4.3 million pounds of Co-Op Bank bonds said today it has written to the lender expressing concerns about the restructuring, according to a statement.

“CLS, along with other bondholders, believes that a committee should be established to enable a dialogue amongst all stakeholders before the bank finalizes its restructuring proposal,” according to the statement from the London-based company.

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