Allen & Overy has advised the Co-operative Group on the terms of the GBP700m capital raising plan to secure the long term future of The Co-operative Bank and on the revised structure of the shared Co-operative “PACE” pension scheme.  Terms of the deal were reached between the Bank, the Group, the pension trustee and an ad-hoc committee of the Bank’s bondholders on 28 June 2017 and the plan was accepted and approved by the Prudential Regulation Authority.

The capital solution for the Bank involves the recapitalisation of GBP443m Tier 2 bonds and GBP250m in new equity.  The Group’s focus was to provide certainty for and protection of the interests of its members and the members of the PACE pension scheme.  Principles have been agreed to sectionalise the PACE pension scheme and to remove the Bank’s obligation to support the Group’s scheme liabilities.  The Bank will contribute GBP100m over 10 years to the Bank section of the scheme and provide initial collateral of GBP216m from the point of sectionalisation.  The broader restructuring will see the Group’s shareholding in the Bank falling to around 1% triggering the termination of the agreement that governs the relationship between them which will come to a formal end in 2020.

The A&O team was led by London partners Mark Sterling, Stephen Mathews and Däna Burstow with support from fellow partners Melissa Samuel, Richard Slynn, Jane Higgins and David Broadley, and from Hannah Valintine (senior associate) and Willoughby Knight (associate).