The Debt Laden Co-Operative Bank

The Co-Operative Bank The restructuring of Co-Op Bank shows how exposed the bank had become. A classic example of excessive borrowing during good times, but when the economic times got tough, the debt burden was simply too much. (over leverage)

[http://www.cooperativebank.co.uk/customerservices/announcements/recentannouncements/outcome-of-review-june-2013]

When one looks at the all bonds that are being re-structured:-

*9.25% Non-Cumulative Irredeemable Preference Shares GB0002224516  £60,000,000  Tier 1
 
13% Perpetual Subordinated Bonds  GB00B3VH4201  £110,000,000  Upper Tier 2
 
5.5555% Perpetual Subordinated Bonds  GB00B3VMBW45  £200,000,000  Upper Tier 2
 
Floating Rate Callable Step-up Dated Subordinated Notes due 2016  XS0254625998  €34,980,000  Lower Tier 2
 
5.875% Subordinated Callable Notes due 2019  XS0189539942  £37,775,000  Lower Tier 2 
 
9.25% Subordinated Notes due 28 April 2021  XS0620315902  £275,000,000  Lower Tier 2
 
Fixed/Floating Rate Subordinated Notes due November 2021  XS0274155984  £8,747,000  Lower Tier 2
 
7.875% Subordinated Notes due 19 December 2022  XS0864253868  £235,402,000  Lower Tier 2
 
5.75% Dated Callable Step-up Subordinated Notes due 2024  XS0188218183  £200,000,000  Lower Tier 2
 
5.875% Subordinated Notes due 2033  XS0145065602  £150,000,000  Lower Tier 2

[* – Tier 1 is the most junior ranking of Target Securities. Lower Tier 2 is the most senior ranking of Target Securities]

Count these numbers and guess what you get :- £1,306,782,200 (£1.306 Billion) of debt that is crippling the bank. The interest rate on some of these bonds is 9.25% and thus the interest repayments are effectively breaking the bank.

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