Co-op investors plan fight against £1.5bn rescue plan

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Co-operative Bank bondholders are planning to fight for a better deal in the lender’s £1.5bn rescue plan, according to reports.

US law firm Brown Rudnick has reportedly been hired to represent small investors in the bank, after parent firm Co-operative Group unveiled plans to make bondholders swap their debt at a discount of at least 30 per cent for new bonds and equity.

Reuters reports that around 800 Co-op bondholders have signed up to a campaign started by Mark Taber, the investor who launched a challenge to a similar move by Bank of Ireland in 2011. Brown Rudnick, which has not commented on the case, won a reprieve for some of the investors involved in the Bank of Ireland challenge.

Taber, who wants Co-operative Group to take more of the pain after the bank’s restructuring, told the Financial Times: “There will be a furious campaign. People are very angry and very worried.”

Under its current rescue plan, Co-operative Group aims to raise £500m by selling its life insurance and general insurance operations. It will then raise £500m in debt that will injected into the bank as equity and make up the remaining shortfall through a debt-for-equity exchange with its junior bondholders, who are expected to lose a combined £500m.

The Financial Times also reports that US hedge fund Aurelius has approached law firm Bingham McCutchen to represent its interests in the Co-op’s ‘bail-in’ , while a third bondholder committee of UK insurance companies is being put together by the Association of British Insurers.