Co-Op Bank to Sell $800 Million of Renewables Debt Under RevivalSally Bakewell
Co-Operative Bank Ltd. will sell a 500 million-pound ($800 million) green-energy debt portfolio after its parent company was forced to cede control of the lender to bondholders to plug a gap in the unit’s capital.
The business, mainly loans to wind farms, combined heat-and-power plants and hydro projects, will be a “standalone renewable business” using a fund structure the bank has been preparing, according to a prospectus on the lender’s website.
“A portfolio sale is deemed to be the optimum exit strategy,” according to the document. The 531.2 million pounds of gross loans as of June 30 have low yields, with about a third of the projects still in the development stage, it said Nov. 4.
The deal is part of 15 billion pounds of “non-core” asset disposals after Co-Operative Group Ltd. last month ceded control of the unit to help plug a 1.5 billion-pound capital hole at the division. The transfer to bondholders contrasts with the so-called ethical stance on investing taken by the bank, which became the first U.K. retail bank with such a policy in 1992.
The bank plans to “run-down and exit” assets such as non-prime home mortgages under a four-to-five year recovery strategy focused on retail and small and medium-sized enterprises. Co-Operative Group, a Manchester-based mutual with business from supermarkets to funeral parlors, retains 30 percent of the bank.
Regulators pushed the group to end the deficit after the bank failed to acquire more than 600 Lloyds Banking Group Plc branches, which would have more than doubled its outlets.
A Co-Operative Bank spokeswoman declined to add to the prospectus, which showed the portfolio had 115.3 million pounds of undrawn commitments and non-performing loans at 1.8 percent.