A rescue plan to plug a £1.5bn black hole in the Co-operative Bank’s finances has been approved by a court, the lender said yesterday.
The decision clears the way for a “liability management exercise” – under which bond holders including US hedge funds will take control of the bank – to be completed by the end of this week.
It comes a day after the troubled lender announced that it had won overwhelming support from investors who were asked to approve the plan.
The Co-op is seeking to restore its reputation following its financial woes and the drugs scandal surrounding former Co-op Bank chairman Paul Flowers. Flowers, who faces a criminal investigation over claims he was involved in the supply of illegal drugs, quit as a Labour councillor on Bradford Council in September 2011.
The bank said in a stock market announcement that the scheme had been sanctioned at a court hearing yesterday.
Bond holders will be given 70 per cent of the business with the current parent, Co-operative Group, left with 30 per cent.
The funerals-to-supermarkets group had initially hoped to retain control of the lender under a planned stock market flotation which would have given owners of bonds a minority stake in return for them pouring £500m into its turnaround fund.
But it later tore up the plan under pressure from major investors.