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Co-op bond holders demand bank pays for their financial advice

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01/07/2013
The Co-operative Group should pay for financial advice for bondholders set to be hit by its restructuring plan as soon as possible, says an action group.

The group set up to protect pensioners hit by the Co-op’s plan is also pressing for the Treasury Select Committee to investigate the deal, according to the Mail on Sunday.

Mark Taber, a professional bond investor who is behind the campaign, said: ‘In announcing the offer, the Co-op said it would look to fund financial advice. It has not been forthcoming. It should be providing advice now.’

Pensioners, some of whom rely on Co-op bonds for up to half their income, have been left fearful by Co-operative Bank’s plans to restructure its bonds, Taber said. Some were considering selling their bonds now and needed advice.

The debt plan was prompted by regulators’ demands that the bank raise £1.5 bn to meet capital requirement rules.

But despite the prospect of lenders to the bank being short-changed in a swap of bonds for shares when it floats on the stock market, Co-op Group, which owns the bank, will retain a majority share.

‘People desperately need advice and information,’ Taber said. The Co-op announced this month that it would restructure its bonds, but details of the offer will not come for several months.

The structure of the deal has provoked controversy, amid suggestions that Co-op Group, which has turnover of £13.5 bn, should have bailed out the bank before bondholders were short-changed.

Last weekend the group paid a £25m dividend to its ‘customer members’ – customers who have earned points by shopping at its grocery stores, at its pharmacies or by having a mortgage with its bank.

The £25m final payout takes the total for the year to £64 m.

‘It’s pretty ripe paying a dividend and saying we can’t put any money into this bank,’ Taber said.

Taber has signed up 1,100 bond investors to his campaign and is talking to US law firm Brown Rudnick about possible legal challenges to the agreement.

A Co-op spokesman said: ‘We are mindful of the different interests of small retail bondholders and are considering alternative options for them. We are also considering the way we can facilitate the provision of independent financial advice to retail holders at the Bank’s cost.’

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