Britain's Co-operative Group decided on a plan to plug US$2.4 billion capital hole at its bank. The said plan forces its bondholders to pay part of the bill. The measure was to avoid a repeat of the taxpayer funded bailouts at the time of the financial crisis.
Bondholders must swap their debt for new bonds and equity in the bank through the "bail-in" model. This will be listed on the London Stock exchange while the Co-op Group will also provide financial support for its banking unit. The Co-op Group is Britain's largest customer owned business gave a statement on Monday.
After Moody cut the lender's credit rating, the future of the bank has been put in question. Britain's Co-operative Group has 4.7 million clients. The bank was warned that it might need taxpayer support but was denied by the financial institution. The capital position of the bank also increased scrutiny after withdrawing from a deal with Lloyds Banking Group last April.
The Co-op Group also runs supermarkets, pharmacies and funeral services. It stated that the plans it had will provide stability for the Co-operative Bank and will generate GBP1 billion of new capital within the year and another GBP500 million in 2014.
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