The Co-operative Bank is to close up to 50 branches or 15% of its estate as control is handed over to investors as part of a £1.5bn rescue plan.
Despite The Co-operative Group initially looking to retain control of the bank, the plan would see investors who bought bonds given 70% control of the bank, leaving The Co-op with just 30%.
The bank will be listed on the stock market next year, if bondholders – including US hedge funds Aurelius Capital Management and Silver Point Capital – vote in favour of the plan.
“If supported by our bondholders and preference shareholders, this deal will secure the bank’s recapitalisation,” said Niall Booker, CEO of Co-operative Bank.
Booker did not confirm how many of the bank’s 9,000 employees would lose their jobs due to branch closures.
The Co-op Group will contribute funds of £462m towards the rescue plan, which Booker said was the first step to “returning the Bank to profitability”.
Under the recapitalisation plan, the reduction in branch numbers will be partially offset by an enhanced online banking service. The Bank is also planning to spend around £400m-£450m on new IT systems over the next three years.
The Co-operative Group has also pledged to enshrine “values and ethics” into the Bank’s constitution, which will be upheld by a Board committee.
“The Bank will be what its customers expect of it – a fair, responsible and trusted Bank that delivers great service to retail and small business customers, underpinned by the values and ethics of the Co-operative movement,” said Co-operative Group CEO Euan Sutherland.
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