Private equity pair Bain Capital and JC Flowers have agreed to buy a minority stake in the UK’s Co-operative Bank from hedge fund BlueMountain amid a quicker than expected turnaround at the lender.
The pair are set to pick up BlueMountain’s 10.01% holding of A shares and 12.05% holding of B shares of The Co-operative Bank Holdings Limited, making them significant investors in the bank alongside its five existing financial sponsor investors.
Co-op Bank was struggling even before the global pandemic, but has since turned annual losses into a £7.2m pre-tax profit in the first quarter of 2021, putting it ahead of schedule in its turnaround strategy.
A statement from CEO Nick Slape, who was brought in last year, said, “At the half-year we will have reached the midpoint of our turnaround strategy and we are ahead of where we expected to be.”
He added, “We are delighted to welcome JC Flowers & Co and Bain Capital Credit and we are pleased that they share our positive view of the future possibilities for our bank.
“This investment builds on the encouraging reception to our £200m debt issuance in November 2020 and is an endorsement of the progress achieved in our five year transformation plan to date, as we anticipate our Bank returning to a position of sustainable profitability from 2021.”
He continued, “We head into the next stage of our transformation with growth in mortgage lending, a renewed and growing SME banking business and improved digitisation to better serve customers.
“Our commitment to being a leader in ESG has been central to our brand for decades, given our heritage in the co-operative movement, and we believe this sets us apart in the market as we work with all our stakeholders to realise our bank’s potential.”
Tim Hanford, head of Europe for JC Flowers & Co, added, “We have followed the development of The Co-operative Bank over the last decade and are impressed by the progress that has been made by the management team and board.
“We now look forward to partnering with them to take advantage of some of the opportunities available in this post-Covid UK banking environment.”
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