Bondholders will be offered a minority shareholding in the Co-op Bank if they accept the terms of the rescue deal. But the Co-op warned yesterday that the newly-listed bank was unlikely to make a profit for several years.
Mr Taber said: “The Co-op has stated that the bank ‘will not be profitable for some years’, so presumably no prospect of a dividend on the ordinary shares they will be offering pensioners in exchange for their bonds for some years either. So how can their offer as announced to date be suitable for their pensioner investors?”
Yup, all those pensioners who held bonds in Britain’s most ethical bank, run as it was as a mutual, without any of that City trading and investment nonsense.
As Ritchie says:
The farce that the Coop was told recently that its board was not suitable to run a bank because it was not made up of bankers has to go: it’s precisely because people are not bankes that they may be suited to their new roles of making sure banks are clean, although competence will also be important too, of course.
Ethics really are more important than competence in that Courageous State
Contrasting a hypothetical time between commencing dividends with the fact that they are pensioners is a bit of a red herring. They can still realise some of the future revenue stream in the net present value of the shares by selling them now.
As I understand it, the Co-Op bank is a limited company wholly owned by a co-operative (the Co-Operative Wholesale Society). So the CWS is the sole shareholder, and is putting in £1bn in new capital, and the bond holders are being ‘asked’ to contribute £500m, in the form of bonds converted to shares. So my question is this – what is the ratio of ownership after the deal? Do the bondholders get one third of the shares in the ‘new’ bank? They after all are contributing one third of the capital required to keep it afloat.
The Co-op: good with food, shite with money.
Apart specifically from his opinions about the management of the Co-op bank, Richard Murphy has also for some years now been giving out his opinion on his site on the share values of other individual companies and of the FT share indices. Generally he think that shares are massively overvalued.
To me it prompts a question:
Given the obvious breadth of his expertise, is there any area of human knowledge and endeavour in which Richard Murphy is not an actual or potential Nobel Laureate?
The Co-op thinks that it can disregard English Law. If it collapses pref shares and debt into equity these will have a large majority of votes so imposing a capital reconstruction that restores the Co-op’s control without the agreement of the bondholders would be illegal
Tim, I really wish you would stop taking the piss out of the co-op/mutual model, yes they’ve screwed t’s not as if the shareholder-owned banks like RBS and Lloyds have done better (plus the Co-op bank hasn’t ended up bailed-out/nationalized- yet)