HOW HEDGE “VULTURES” CAN SEIZE CONTROL OF THE CO-OP BANK
How the Hedge “Vulture” Funds can Seize Control of the Co-op Bank
by Sean Boyle
The recapitalisation plan gives the “vultures” 45% of equity and the option to buy another 25% of equity for £125 million. Exercising this free generous option would give the “vultures” 45% + 25% = 70% ownership of the Co-op Banking Group, including the Smile online bank and other valuable assets.
Only 50.001% equity is required for executive control of the Co-op Banking Group. Therefore the “vultures” could gain control of the Co-op Banking Group by exercising part of their option and buy an additional 5% of Co-op Bank equity for £25 million and so taking their ownership of the Co-op Banking Group to 50%.
In addition the “recapitalisation” plan gifts the “vultures” £100 million in recycled Co-op Bank debt meaning the hedge “vulture” funds will still have the Co-op Bank in hock.
Possibly the “vultures” may then be able to settle the £100 million + interest due (still to be set “independently ???” by 3rd party Canaccord Genuity Ltd) on their newly acquired recycled Co-op Bank debt against the supposed £125 million cost of “purchasing” an additional 25% of Co-op Bank equity.
Meaning the “vultures” could potentially seize control and 70% of the equity of the Co-op Banking Group for between £25 million and absolutely nothing.
Despite repeated spin in the media over the past several months there is no mention what-so-ever in the recapitalisation plan of any official plans for stock market flotation or any public offering of the Co-op Banking Group.
This makes sense because who could responsibly invest in long-term share ownership of any bank with significant portfolios of toxic assets from Britannia?
However the recapitalisation plan make it possible for the Hedge “Vulture” Funds “run down” the Co-op Banking Group sufficiently to the point of no longer needing to be a UK clearing bank.
Page 8 of the recapitalisation plan pdf states:
“The Non-core Business … consists of those asset classes which are not consistent with the Bank’s Core Business strategy and are managed to achieve the most appropriate asset value on an individual portfolio basis, or are targeted for run down or exit.”
“The core retail banking product offering consists of a range of current accounts and money transmission services, lending and savings products, to individuals and households in the UK, while the core corporate banking business provides services to SMEs, with a turnover of less than £25 million.”
Once the Co-op Bank no longer needs to be a PLC the Hedge “Vulture” Funds would legally be able to take the bank into their private ownership.