June 26, 2017 / 7:07 AM / 6 months ago

Co-op Bank says nears rescue deal with investor group

LONDON, June 26 (Reuters) - Britain’s Co-operative Bank said on Monday it was close to agreeing a financial rescue package with leading investors that would shore up its capital base and end months of uncertainty about its future.

The Co-op Bank, which provides banking services to almost 4 million retail and small and medium sized enterprises, said it was in advanced talks with a group of existing investors over a deal, which includes a recapitalisation.

A deal would allow the bank to meet the longer term capital requirements demanded by the regulator and to continue as a stand-alone entity, while safeguarding its values and ethics, it said in a statement.

The bank, which put itself up for sale in February, nearly collapsed in 2013 after losses from problem real estate loans and has been struggling to rebuild its financial health.

Co-op said it was discussing its capital raise options with the UK’s Prudential Regulation Authority.

A majority of the key commercial aspects of the deal had been “substantially agreed”, it said, and it was in advanced talks over how to manage the group’s pension liabilities, it said in response to media reports of an impending deal.

“Discussions are continuing between the parties, including on other key matters, with a view to agreeing the final aspects of the Proposal and a further announcement will be made in due course,” it said.

As a result, the Co-op said it had decided to discontinue a formal sale process.

In an update on its financials, the Co-op said it now targeted an improved capital position, sustainable profitability in the medium term and a mid-single digit return-on-equity in 2021.

Reporting by Simon Jessop, editing by Louise Heavens

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