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2013 News

Announcement of the Results of the Exchange Offers and the Bondholder and Shareholder Meetings

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

12 December 2013

The Co-operative Group and The Co-operative Bank Liability Management Exercise – Announcement of the Results of the Exchange Offers and the Bondholder and Shareholder Meetings held on 11 December 2013

•  Proposals passed by holders of the Preference Shares, 13% Bonds and 5.5555% Bonds. 99.89% of the aggregate votes cast across all three series were in favour

 •  Successful completion of the Liability Management Exercise now only dependent upon Scheme approval and sanction, currently expected on or shortly after 18 December 2013

 •  The Co-operative Group and The Co-operative Bank remain highly confident that the £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 and supplemented on 4 December 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 deadline for participating in the Offers passed at 4.30 p.m., London time, on 6 December 2013. Meetings of the holders of the Preference Shares, 13% Bonds and 5.5555% Bonds convened to consider and vote on the Proposals were held on 11 December 2013. The Co-operative Group and The Co-operative Bank are now announcing the participation results of the Exchange Offers and approval of the Proposals at those Meetings.

Results of the Exchange Offers and the Meetings

Securities

Outstanding Nominal Amount

Nominal Amount Voted

Quorum Requirement

(% of outstanding nominal)**

Voting Requirement

(% of votes cast to be in favour)**

Proposal passed (Y/N)

 

 

In favour

Against

Required

Present

Required

Voted

 

Preference Shares*

£63.7m

£56,892,989 1

£13,764 2

33.33%

89.34%

75%

99.98%

Yes

13% Bonds

£110m

£95,735,000 3

£197,000 4

66.67%

87.21%

75%

99.79%

Yes

5.5555% Bonds

£200m

£195,940,000 5

£180,000 6

66.67%

98.06%

75%

99.91%

Yes

____

* The data in this announcement includes the £3.7m Preference Shares allotted in satisfaction of the preferential dividend scheduled for 30 November 2013.

** Figures in these columns (and where replicated elsewhere 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 £63,700,000 in nominal amount of Preference Shares outstanding (including the £3,700,000 additional Preference Shares (the “ Additional Preference Shares ”) allotted in satisfaction of the preferential dividend scheduled for 30 November 2013, as described in the Consent and Exchange Offer Memorandum).

Votes were cast in respect of 89.34% of the total nominal amount outstanding of the Preference Shares (including the Additional Preference Shares), of which 99.98% were cast in favour. Accordingly, the Extraordinary Resolution approving the Proposals considered at the Preference Share Meeting was duly passed by the holders.

In accordance with Listing Rule 14.3.7R(1), a copy of the resolutions passed at the Preference Share Meeting have been submitted to the UK Listing Authority and will be available for inspection at the UK Listing Authority's Document Viewing Facility via the National Storage Mechanism which is located at http://www.hemscott.com/nsm.do.

13% Bonds

There are currently £110,000,000 in nominal amount of 13% Bonds outstanding.

Votes were cast in respect of 87.21% of the total nominal amount outstanding of the 13% Bonds, of which 99.79% were cast in favour. Accordingly, the Extraordinary Resolution approving the Proposal considered at the 13% Bondholders Meeting was duly passed by the holders.

5.5555% Bonds

There are currently £200,000,000 in nominal amount of 5.5555% Bonds outstanding.

Votes were cast in respect of 98.06% of the total nominal amount outstanding of the 5.5555% Bonds, of which 99.91% were voted in favour. Accordingly, the Extraordinary Resolution approving the Proposal considered at the 5.5555% Bondholders Meeting was duly passed by the holders.

General Meeting

In addition to the Meetings described above, a general meeting (the “ General Meeting ”) of the shareholders of The Co-operative Bank was also held on 11 December 2013 to vote on certain proposals relating to the Liability Management Exercise. These resolutions were also approved by the shareholders.

In accordance with Listing Rule 14.3.7R(1), a copy of the resolutions passed at the General Meeting have been submitted to the UK Listing Authority and will be available for inspection at the UK Listing Authority's Document Viewing Facility via the National Storage Mechanism which is located at http://www.hemscott.com/nsm.do.

Acceptance of Offers

The Co-operative Group and The Co-operative Bank confirm that they will accept all valid offers to exchange or sell Preference Shares, 13% Bonds and 5.5555% Bonds pursuant to the Exchange Offers, conditional only on satisfaction of the Settlement Condition. The Settlement Condition will now be satisfied if (i) the Scheme (as defined below) is approved by the requisite majority of the holders of Dated Notes (as defined below) and sanctioned by the court, (ii) an office copy of the sanction order is delivered to the Registrar of Companies at Companies House and (iii) the Scheme becomes unconditional in accordance with its terms.

Final Repayment Notes and Instalment Repayment Notes

Holders of Preference Shares and 13% Bonds were, under the terms of the Offers, entitled to elect either the Final Repayment Notes option or the Instalment Repayment Notes option. The elections made were as follows:

Securities

Outstanding Nominal Amount

Nominal Amount Instructed

Default for Holders not making an election

Final Repayment Notes

Instalment Repayment Notes

Preference Shares

£63.7m

£43,048,411

£13,743,442

Final Repayment Notes

13% Bonds

£110m

£81,142,000

£14,285,000

Final Repayment Notes

Elections for Final Repayment Notes represented a higher nominal amount of both Preference Shares and 13% Bonds than elections for Instalment Repayment Notes. Therefore, those holders of Preference Shares and 13% Bonds who did not make a valid election will, if the Liability Management Exercise successfully completes, be eligible to receive Final Repayment Notes in exchange for their Preference Shares and 13% Bonds.

Next steps

Successful completion of the Liability Management Exercise is now conditional only 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.

The meeting for the holders of the Dated Notes to vote on the Scheme is currently scheduled for 16 December 2013, and the court hearing for sanctioning the Scheme (if approved by such holders) is currently expected to be held on 18 December 2013.

Sanction of the Scheme on 18 December 2013 should enable The Co-operative Group and The Co-operative Bank to successfully complete the Liability Management Exercise on 20 December 2013, meaning that holders would cease to hold their Preference Shares, 13% Bonds, 5.5555% Bonds and Dated Notes on that date and would be eligible to receive their new Final Repayment Notes, Instalment Repayment Notes, Bank T2 Notes, New Ordinary Shares and/or Additional New Ordinary Shares, as applicable, and the relevant cash amounts payable under the terms of the Exchange Offers. It is expected that the Final Repayment Notes, Instalment Repayment Notes and Bank T2 Notes would be listed, and trading on the London Stock Exchange would commence, on or around 23 December 2013.

The Co-operative Group and The Co-operative Bank remain highly confident that their £1.5 billion Recapitalisation Plan for The Co-operative Bank can be achieved.

Media enquiries

The Co-operative Group: Tulchan Communications:

Russ Brady – 07880 784442 Susanna Voyle - 020 7353 4200

Jonathan Sibun

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Investor enquiries:

The Co-operative Bank:

0800 7312310

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

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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 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 the Bank and the Group for providing the protections afforded to its clients or for providing advice in 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.