Fears grow for Co-op Bank jobs
Fears are mounting over plans for around 1,000 job cuts at t he Co-operative Group's troubled banking arm as it prepares to unveil details of a revised rescue deal tomorrow to plug a £1.5 billion hole in its finances.
Over 10% of the Co-op Bank's 9,000-strong workforce face the axe as part of the jobs cull, with the brunt of the redundancies expected across its corporate lending business, according to reports.
It is understood the final number of job losses is still being decided and may not be announced alongside the Co-op's update on its recapitalisation plan due on Monday.
The Co-op declined to comment on the job loss plan.
It struck a deal last month to save its battered banking arm, but the move will see it hand over control of the ethical lender to a group of powerful investors.
The customer-owned group will be left with a 30% stake in the Co-operative Bank after US hedge funds and big blue-chip investors such as pension funds and insurers won a battle to scrap previous plans that would have seen them take a minority stake in return for a £500 million loss on their debt.
Further details on the new rescue deal will reveal the Co-operative is to inject around £400 million into the banking business through the sale of its two insurance businesses, according to The Sunday Telegraph.
But this is less than the £1 billion of capital the Co-op initially expected to pump in to meet City regulator rules to strengthen its balance sheet.
Several thousand small retail investors such as pensioners, who invested an average of £1,000 each in the high-yielding bonds for a steady income, are expected to be handed income-paying bonds after campaigning against the initial plan which would have given them shares in the bank.
However, the new bonds will pay a lower rate of dividend.
The Co-op has faced tough questions over the impact on the bank's ethical values from the new plan to cede control to predatory US hedge funds and blue-chip investors.
Co-op Group chief executive Euan Sutherland has insisted the supermarkets-to-funerals group, which traces its roots back to the Rochdale Pioneers in 1844, will retain ''effective control'' of the bank as it will be its biggest single shareholder.
He said last month the co-operative principles will be embedded in the constitution of the bank.
The Co-op had originally said there would be "no plan B" for its recapitalisation, which would have seen the Co-op retain control through a stock market flotation - a turnaround strategy requiring a £500 million contribution from bondholders, with £1 billion coming from the group.
But bondholders led by US hedge funds Aurelius Capital Management and Silver Point Capital - who own 43% of the higher-ranking bonds which had been due to be hit - ratcheted up the pressure on the bank, proposing an alternative plan of converting more debt into shares.
The new deal is expected to need approval from 80% of shareholders, with a vote set to take place before the year end.
The Co-op Bank's woes have been blamed on soured corporate loans, many of which were acquired with its takeover of Britannia Building Society in 2009.