The Co-operative Group and The Co-operative Bank announce the successful completion of their Liability Management Exercise as the cornerstone of the £1.5 billion Recapitalisation Plan for The Co-operative Bank

December 20, 2013

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM AUSTRALIA, NEW ZEALAND, SOUTH AFRICA, JAPAN, CANADA OR SWITZERLAND OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

The Co-operative Group and The Co-operative Bank announce the successful completion of their Liability Management Exercise as the cornerstone of the £1.5 billion Recapitalisation Plan for The Co-operative Bank

  • Liability Management Exercise to raise £1 billion Common Equity Tier 1 Capital successfully completed on 20 December 2013. Together with the £125 million of Common Equity Tier 1 Capital raised pursuant to the Additional New Ordinary Shares Offer in the Scheme, £40 million in interest savings and the £333 million additional Common Equity Tier 1 Capital to be contributed by the Group, The Co-operative Group and The Co-operative Bank are confident that the full £1.5 billion requirement will be met in 2014 as planned
  • The Co-operative Group and The Co-operative Bank are grateful for the support of the Bank’s subordinated bondholders and Preference Shareholders
  • Strengthened Bank, with The Co-operative Group as single biggest shareholder, now better placed to deliver focused turnaround strategy

On 4 November 2013, Co-operative Group Limited ("The Co-operative Group” or the “Group”) and The Co-operative Bank p.l.c. (“The Co-operative Bank” or the “Bank”) announced their revised Recapitalisation Plan for The Co-operative Bank, including the liability management exercise to be concluded this year (the “Liability Management Exercise”).

The Co-operative Group and The Co-operative Bank are delighted to confirm that the Liability Management Exercise, a fundamental part of the Recapitalisation Plan, has successfully completed today.

Euan Sutherland, Group Chief Executive of The Co-operative Group, said:

“Today we have taken a major step forward in securing the future of The Co-operative Bank, with the support of our investors. In putting together this plan, we listened to all our stakeholders and worked to protect the interests of customers and members while avoiding a taxpayer bail-out. The Co-operative Group has played its part with the contribution of substantial funds, including a targeted solution to meet the needs of retail bondholders.  The Co-operative Group remains the Bank’s single largest shareholder and we look forward to working with other investors and the strengthened management team to ensure The Co-operative Bank moves forward, while remaining true to its ethical heritage.”

Niall Booker, Chief Executive of The Co-operative Bank, said:

“I am delighted that we have successfully completed the Liability Management Exercise that is central to our plans to stabilise and strengthen The Co-operative Bank. There is much work to do, but I and the rest of the management team are confident that under our new ownership structure we are now well placed to deliver a sustainable improvement in our performance. We have set out a clear strategy, with a smaller, de-risked Bank, focused on retail and small and medium sized businesses and we will now deliver that, building on The Co-operative Bank’s heritage. This was Europe’s first voluntary, non-taxpayer funded bail-in and I would like to thank all stakeholders who have contributed to this successful conclusion.”

Richard Pym, Non-Executive Chairman of The Co-operative Bank, said:

“This is an important milestone in the transformation of The Co-operative Bank and I would like to thank our investors for their support, our customers for their continued loyalty and all our people who have worked so hard through such a difficult time. With our balance sheet strengthened, I and the rest of the Board will be working with our rejuvenated management team to ensure that we continue to provide customers with an alternative choice to the traditional banks. Importantly, The Co-operative Bank’s ethics and values will be protected, both in the Bank’s constitution and via an independent ethics committee. The British banking system remains very concentrated, with a small number of institutions, and The Co-operative Bank is now better placed to play its full part in maintaining a competitive landscape for customers.”

Update on The Co-operative Bank’s share capital

As part of the Liability Management Exercise and the Recapitalisation Plan, The Co-operative Bank has today allotted and issued 250 million new ordinary shares of five pence each (the "New Ordinary Shares"). Pursuant to a shareholder resolution dated 15 November 2013, the Bank's existing "A" ordinary shares were re-designated as deferred shares and have been cancelled today.

The New Ordinary Shares will not initially be admitted to the Official List maintained by the Financial Conduct Authority or to trading on the main market of the London Stock Exchange.  Going forward, the Bank intends to explore the possibility with the Financial Conduct Authority of seeking a premium listing of the New Ordinary Shares on the Official List within 12 months of completion of the Liability Management Exercise, subject to meeting the necessary eligibility criteria.

In connection with the Liability Management Exercise, The Co-operative Group acquired the entire issued class of the Bank's Preference Shares and has signed a Deed of Waiver waiving any rights to income and capital in respect of those Preference Shares.

Scheme confirmation

The Co-operative Bank confirms that the Scheme Settlement Date is 20 December 2013.

Capitalised terms used and not otherwise defined in this announcement have the meanings given in the Consent and Exchange Offer Memorandum relating to the Liability Management Exercise (the “Consent and Exchange Offer Memorandum”), which is appended to and forms part of the respective Prospectuses published by The Co-operative Group and The Co-operative Bank on 4 November 2013 and supplemented on 4 December 2013, or (as applicable) in the explanatory statement relating to the Scheme (originally dated 18 November 2013 and amended on 4 December 2013).

Media enquiries

The Co-operative Group

Russ Brady – 07880 784442   

Tulchan Communications

Susanna Voyle and Jonathan Sibun - 020 7353 4200

Investor enquiries

The Co-operative Bank

0800 7312310
http://www.co-operativebank.co.uk/investorrelations

Disclaimers

Neither this announcement, the publication in which it is contained nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into Australia, New Zealand, South Africa, Japan, Canada or Switzerland or any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. Any failure to comply with this restriction may constitute a violation of securities law in those jurisdictions.  The distribution of this document in other jurisdictions may also be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor. The availability of the transactions described herein and the distribution of this announcement in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

In particular, this announcement does not constitute an offer for sale of, or a solicitation to purchase or subscribe for, any securities in the United States. No securities of the Group or the Bank have been, or will be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), and securities of the Group or the Bank may not be offered or sold in the United States absent an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Group and the Bank securities have been offered by means of the prospectus and Scheme documents relating to the Liability Management Exercise.

This announcement is an advertisement and not a prospectus. Investors should not make any investment decision regarding any securities referred to in this announcement or in the Liability Management Exercise except on the basis of information contained in the prospectuses (as supplemented) and Consent and Exchange Offer Memorandum published by the Group and the Bank and the Scheme documents made available by the Bank.

HSBC Bank plc (“HSBC”) has been appointed as a dealer manager by the Bank and the Group to facilitate the LME and as adviser to the Bank in connection with the LME. HSBC is authorised and regulated by the PRA and the FCA and is acting exclusively for the Bank (in its capacity as a dealer manager and adviser) and the Group (in its capacity as a dealer manager) in connection with the LME and will not regard any other person (whether or not a recipient of this announcement or a holder of the Bank’s securities) as a client in relation to the LME and will not be responsible to anyone other than the Bank and the Group for providing the protections afforded to its clients or for providing advice in relation to the LME or any other matter referred to in this announcement.

UBS Limited (“UBS”) has been appointed as a dealer manager by the Bank and the Group to facilitate the LME and as adviser to the Group in connection with the LME. UBS is authorised and regulated by the PRA and the FCA and is acting exclusively for the Bank (in its capacity as a dealer manager) and the Group (in its capacity as a dealer manager and adviser) in connection with the LME and will not regard any other person (whether or not a recipient of this announcement or a holder of the Bank’s securities) as a client in relation to the LME and will not be responsible to anyone other than the Bank and the Group for providing the protections afforded to its clients or for providing advice in relation to the LME or any other matter referred to in this announcement.

This announcement has been issued by and is the sole responsibility of the Bank and the Group. Neither HSBC nor UBS accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this announcement or for any other statement made or purported to be made by it, or on its behalf, in connection with the Bank, the Group or the LME and nothing in this announcement may be relied upon as a promise or representation in this respect, whether or not in the past or future. Subject to applicable law, each of HSBC and UBS accordingly disclaims all and any responsibility or liability, whether arising in tort, contract or otherwise, which it might otherwise have in respect of this announcement or any such statement.