Co-Op Rescue plan launched

TruckerT

pqrdef wrote: »

A lot of commentators seem to have misread the signs. They believed the propaganda and thought the Group still wanted to own an ethical bank, but was just a bit strapped for cash

I can easily understand the commentators getting it wrong, but where was the 'new' regulatory system?

TruckerT

pqrdef

TruckerT wrote: »

I can easily understand the commentators getting it wrong, but where was the 'new' regulatory system?

The PRA is all in favour. Everything is going according to plan. Bank cocks up, find some investors to fleece. Not enough in said bank, rope some in from a different bank.

Only thing is, the banks are all bust and they can't all get taken over by each other.

Thrugelmir

pqrdef wrote: »

Only thing is, the banks are all bust and they can't all get taken over by each other.

Banks are shrinking in size (asset base). As they return to their core trading activities.

paddyrg

For those who are feeling heartbroken for bondholders - those people took a risk by going for an above market interest return with a bond product with no fixed timespan. These products are not savings accounts (which are of course protected upto £85k/person/bank) but low-regulation products not widely available over the counter.

If you're going for above-market returns you give up security in return. This isn't news, it has always been the case for any kind of investment.

John_Pierpoint

pqrdef wrote: »

Co-op Bank has nowhere to go now though. Its systems badly need an upgrade. Its loan book needs continual refinancing, but its credibility is shot. It's started slimming itself down - it's sold off a chunk of the ex-Britannia loan book and is disentangling its larger business customers. It's mentioned cost savings - read branch closures and job losses. Next year it'll join TSB and Williams & Glyns as a small retail bank looking for a buyer. If Branson and JC Flowers are still interested, they'll think it's Christmas.

Yorkshire Bank is a commercial bank in England and Wales, a division of Clydesdale Bank, which in turn is a subsidiary of National Australia Bank.

What is happening to these two = is NAB still trying to pull out?

antrobus

John_Pierpoint wrote: »

Yorkshire Bank is a commercial bank in England and Wales, a division of Clydesdale Bank, which in turn is a subsidiary of National Australia Bank.

What is happening to these two = is ANB still trying to pull out?

There have been rumours that NAB want to sell. At various times NAM has denied that a fire sale is planned. The last I heard the UK business was back in profit, but that might have something to do with the fact that £5 or £6 billion's worthy of dodgy commercial lending was shifted onto the NAB balance sheet towards the end of last year.

southcoastsounds

Emma Simon in today's Telegraph has written and article "Will I lose money on my Co-op bonds?" and has linked to a useful list of all the bonds affected.

antrobus

The Co-op Group clearly has has more than adequate assets and resources to cover the PRA capital requirements of £1.5 billion while honouring the Bank's creditors. However, the details that have been announced make it clear that the Co-op Group is seeking to maintain large majority ownership and control (over 75% of the ordinary shares) while seeking to obtain a £1 billion contribution from holders of the bank's subordinated debt and preference shares through an exchange offer with no cash or increased liability cost to the overall Group. Only then will the Group inject the £500 million proceeds from the sale of the 2 insurance divisions to make any sort of contribution. It is also highly surprising that the PRA have approved pursuit of a scheme, by a solvent bank with a controlling shareholder of substance, which upends the established capital hierarchy in this way.

http://www.fixedincomeinvestments.org.uk/fixed-interest-blog/troubleattheco-op

So says Mark Taber. I think he might have a point.

pqrdef

paddyrg wrote: »

For those who are feeling heartbroken for bondholders - those people took a risk

"Took a risk" doesn't cut it - people are supposed to know what risk they're taking.

The understanding has always been that bondholders don't lose until shareholders are wiped out. Which in this case would have meant that the parent group had to bail out the bank or write off its own stake in it.

On that basis, people thought the Co-op Bank was pretty safe. If they'd guessed wrong and the parent had chosen to throw it to the wolves, then tough.

But what's happening is Plan C, shameless gerrymandering that few people realised was legally possible. When some of them bought the bonds, it wasn't.

I won't cry for the bondholders, but the principles and precedents here are highly dangerous. And don't think nobody's watching.

pqrdef

antrobus wrote: »

So says Mark Taber. I think he might have a point.

Not too sure it's a "solvent bank". But if the Co-op gets away with this, it won't be the last.