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2013 News

The Co-operative Group and The Co-operative Bank Liability Management Exercise – Announcement of Early Participation Results and satisfaction of the Early Participation Threshold condition

Early Participation Results

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM AUSTRALIA, NEW ZEALAND, SOUTH AFRICA, JAPAN, CANADA OR SWITZERLAND OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

The Co-operative Group and The Co-operative Bank Liability Management Exercise – Announcement of Early Participation Results and satisfaction of the Early Participation Threshold condition

  • Retail bondholders back The Co-operative Bank Recapitalisation Plan
  • Overwhelming support for the Liability Management Exercise from holders of the Preference Shares, 13% Bonds and 5.5555% Bonds. 99.91% of the votes submitted are in favour. Proposals expected to be approved by such holders at meetings on 11 December 2013
  • The Co-operative Group and The Co-operative Bank highly confident in their £1.5 billion Recapitalisation Plan for The Co-operative Bank
  • Early Participation Threshold condition satisfied
  • Successful completion of the Liability Management Exercise dependent also upon Scheme approval and sanction, currently expected on or shortly after 16 December 2013

Joint statement of The Co-operative Group and The Co-operative Bank:

“The Co-operative Group and The Co-operative Bank are delighted at the overwhelming levels of support for the Liability Management Exercise at this critical juncture, and we would like to thank all our bondholders and Preference Share holders for backing the Recapitalisation Plan. Based on the votes received so far, we expect the proposals to be approved at the meetings of the holders of the Preference Shares, 13% Bonds and 5.5555% Bonds on 11 December 2013. Successful completion of the Liability Management Exercise is also dependent on the success of the Scheme - holders of the Dated Notes are currently due to vote on the Scheme on 11 December 2013. We are now highly confident that our £1.5 billion Recapitalisation Plan for The Co-operative Bank can be achieved.”

Background

On 4 November 2013, Co-operative Group Limited ("The Co-operative Group” or the “Group”) and The Co-operative Bank p.l.c. (“The Co-operative Bank” or the “Bank”) announced their revised Recapitalisation Plan for The Co-operative Bank, including the liability management exercise to be concluded this year (the “Liability Management Exercise”).

Capitalised terms used and not otherwise defined in this announcement have the meanings given in the Consent and Exchange Offer Memorandum relating to the Liability Management Exercise (the “Consent and Exchange Offer Memorandum”), which is appended to and forms part of the respective Prospectuses published by The Co-operative Group and The Co-operative Bank on 4 November 2013.

The Liability Management Exercise includes exchange offers (the “Exchange Offers”) and related proposals (the “Proposals” and, together with the Exchange Offers, the “Offers”) in respect of the following securities issued by The Co-operative Bank:

  • 9.25% Non-Cumulative Irredeemable Preference Shares (ISIN: GB0002224516) (the “Preference Shares”);
  • 13% Perpetual Subordinated Bonds (ISIN: GB00B3VH4201) (the “13% Bonds”); and
  • 5.5555% Perpetual Subordinated Bonds (ISIN: GB00B3VMBW45) (the “5.5555% Bonds”).

The Early Participation Deadline in respect of the Offers (4.30 p.m., London time, on 29 November 2013) has now passed. The Co-operative Group and The Co-operative Bank are now announcing the early participation results of the Exchange Offers and satisfaction of the Early Participation Threshold condition.

Early Participation Results

Securities Outstanding Nominal Amount Nominal Amount Voted Quorum Requirement (% of outstanding nominal)**

 

Voting Requirement (% of votes cast to be in favour)**
    In favour Against Required Instructed Required Instructed
Preference Shares* £60m
£52,704,2981 £1,7982 33.33% 87.84% 75% 100%
13% Bonds £110m £85,768,0003 £116,0004 66.67% 78.08% 75% 99.86%
5.5555% Bonds £200m £191,664,0005 £175,0006
66.67% 95.92% 75% 99.91%

* The data in this announcement excludes the £3.7m Preference Shares being allotted in satisfaction of the preferential dividend scheduled for 30 November 2013.
** Figures in these columns (and where replicated in this announcement) are rounded to two decimal places where appropriate.
1 £15,000 of which were cast by U.S. persons
2 None of which were cast by U.S. persons
3 £21,000 of which were cast by U.S. persons
4 £1,000 of which were cast by U.S. persons
5 £579,000 of which were cast by U.S. persons
6 None of which were cast by U.S. persons

Preference Shares

There are currently £60,000,000 Preference Shares outstanding (excluding the £3,700,000 additional Preference Shares (the “Additional Preference Shares”) being allotted in satisfaction of the preferential dividend scheduled for 30 November 2013, as described in the Consent and Exchange Offer Memorandum).

In order for the relevant Proposal (and, accordingly, the Liability Management Exercise) to be approved by the holders of the Preference Shares at the meeting scheduled for 1.00 p.m. (London time) on 11 December 2013, at least one-third (33.33%) of the total nominal amount outstanding of the Preference Shares must be voted at that meeting, and of the votes cast at least three-quarters (75%) must be voted in favour.

As at the Early Participation Deadline, voting instructions in respect of 87.84% of the total nominal amount outstanding of the Preference Shares (excluding the Additional Preference Shares) had been received, of which 100.00% were voted in favour. Such voting instructions would be sufficient for the meeting on 11 December 2013 to be quorate and for the Proposal to be approved.

13% Bonds

There are currently £110,000,000 13% Bonds outstanding.

In order for the relevant Proposal (and, accordingly, the Liability Management Exercise) to be approved by the holders of the 13% Bonds at the meeting scheduled for 2.00 p.m. (London time) on 11 December 2013, at least two-thirds (66.67%) of the total nominal amount outstanding of the 13% Bonds must be voted at that meeting, and of the votes cast at least three-quarters (75%) must be voted in favour.

As at the Early Participation Deadline, voting instructions in respect of 78.08% of the total nominal amount outstanding of the 13% Bonds had been received, of which 99.86% were voted in favour. Such voting instructions would be sufficient for the meeting on 11 December 2013 to be quorate and for the Proposal to be approved.

5.5555% Bonds

There are currently £200,000,000 5.5555% Bonds outstanding.

In order for the relevant Proposal (and, accordingly, the Liability Management Exercise) to be approved by the holders of the 5.5555% Bonds at the meeting scheduled for 3.00 p.m. (London time) on 11 December 2013, at least two-thirds (66.67%) of the total nominal amount outstanding of the 5.5555% Bonds must be voted at that meeting, and of the votes cast at least three-quarters (75%) must be voted in favour.

As at the Early Participation Deadline, voting instructions in respect of 95.92% of the total nominal amount outstanding of the 5.5555% Bonds had been received, of which 99.91% were voted in favour. Such voting instructions would be sufficient for the meeting on 11 December 2013 to be quorate and for the Proposal to be approved.

Summary

On the basis of the early participation results stated above, and subject to any exercise of revocation rights which the holders may acquire in the limited circumstances described in the Consent and Exchange Offer Memorandum, The Co-operative Group and The Co-operative Bank currently expect the relevant Proposals to be approved by the holders of the Preference Shares, 13% Bonds and 5.5555% Bonds at the respective meetings on 11 December 2013.

In addition to each of the Proposals being approved, successful completion of the Liability Management Exercise is also conditional upon the scheme of arrangement (the “Scheme”) in respect of seven series of dated subordinated notes issued by The Co-operative Bank (the “Dated Notes”) being approved by the holders of the Dated Notes, sanctioned by the court and becoming effective and unconditional in accordance with its terms.

Satisfaction of Early Participation Threshold condition

Under the terms of the Offers as set out in the Consent and Exchange Offer Memorandum, the exchange or sale of Preference Shares, 13% Bonds and 5.5555% Bonds pursuant to the Liability Management Exercise on the basis of the Early Consideration Amounts specified in the Prospectuses (which are higher than the Late Consideration Amounts specified in the Prospectuses) was conditional upon the Early Participation Threshold having been achieved by the Early Participation Deadline (the “Early Participation Condition”).

The Early Participation Threshold was achieved by the Early Participation Deadline. Accordingly, the Early Participation Condition has been satisfied.  If the Liability Management Exercise successfully completes, the amount of Group Notes or Bank T2 Notes (as applicable) which holders of Preference Shares, 13% Bonds and 5.5555% Bonds will be eligible to receive upon settlement of the Liability Management Exercise will be the higher amounts based on the Early Consideration Amounts.

Next steps

The Expiration Deadline for the Exchange Offers (the latest time at which holders can submit exchange instructions in the Exchange Offers or vote in respect of the Proposals) is scheduled for 4.30 p.m., London time, on 6 December 2013. The Meetings of the holders of the Preference Shares, 13% Bonds and 5.5555% Bonds have been convened for 11 December 2013.

The Co-operative Group and The Co-operative Bank currently expect to make a further announcement regarding the progress of the Liability Management Exercise on or around 12 December 2013.

The meeting for the holders of the Dated Notes to vote on the Scheme is currently scheduled for 11 December 2013, and the court hearing for sanctioning the Scheme (if approved by such holders) is currently expected to be held on 16 December 2013.

Media enquiries

The Co-operative Group:
Russ Brady – 07880 784442

Tulchan Communications:
Susanna Voyle / Jonathan Sibun - 020 7353 4200

Investor enquiries:

The Co-operative Bank:
0800 7312310

http://www.co-operative.coop/Bondholders/

Disclaimers

Neither this announcement, the publication in which it is contained nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into Australia, New Zealand, South Africa, Japan, Canada or Switzerland or any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. Any failure to comply with this restriction may constitute a violation of securities law in those jurisdictions.  The distribution of this document in other jurisdictions may also be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The availability of the transactions described herein and the distribution of this announcement in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

In particular, this announcement does not constitute an offer for sale of, or a solicitation to purchase or subscribe for, any securities in the United States. No securities of the Group or the Bank have been, or will be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), and securities of the Group or the Bank may not be offered or sold in the United States absent an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Group and the Bank securities are being offered by means of a prospectus or Scheme document that may be obtained from the Bank and/or the Group, as applicable.

This announcement is an advertisement and not a prospectus. Investors should not make any investment decision regarding any securities referred to in this announcement or in the Liability Management Exercise except on the basis of information contained in the prospectuses (as supplemented) and Consent and Exchange Offer Memorandum published by the Group and the Bank and the Scheme documents made available by the Bank. The Group and the Bank expressly reserve the right to adjust or amend the terms of the Liability Management Exercise and the securities.

HSBC Bank plc (“HSBC”) has been appointed as a dealer manager by the Bank and the Group  to facilitate the LME and as adviser to the Bank in connection with the LME. HSBC is authorised and regulated by the PRA and the FCA and is acting exclusively for the Bank (in its capacity as a dealer manager and adviser) and the Group (in its capacity as a dealer manager) in connection with the LME and will not regard any other person (whether or not a recipient of this announcement or a holder of the Bank’s securities) as a client in relation to the LME and will not be responsible to anyone other than the Bank and the Group for providing the protections afforded to its clients or for providing advice in the relation to the LME or any other matter referred to in this announcement.

UBS Limited (“UBS”) has been appointed as a dealer manager by the Bank and the Group to facilitate the LME and as adviser to the Group in connection with the LME. UBS is authorised and regulated by the PRA and the FCA and is acting exclusively for the Bank (in its capacity as a dealer manager) and the Group (in its capacity as a dealer manager and adviser) in connection with the LME and will not regard any other person (whether or not a recipient of this announcement or a holder of the Bank’s securities) as a client in relation to the LME and will not be responsible to anyone other than and the Group for providing the protections afforded to its clients or for providing advice in the relation to the LME or any other matter referred to in this announcement.

This announcement has been issued by and is the sole responsibility of the Bank and the Group. Neither HSBC nor UBS accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this announcement or for any other statement made or purported to be made by it, or on its behalf, in connection with the Bank, the Group or the LME and nothing in this announcement may be relied upon as a promise or representation in this respect, whether or not in the past or future. Subject to applicable law, each of HSBC and UBS accordingly disclaims all and any responsibility or liability, whether arising in tort, contract or otherwise, which it might otherwise have in respect of this announcement or any such statement.