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)
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.