The finance director of the Co-operative Bank is to step down weeks after the lender concluded a £700m rescue deal designed to secure its long-term future.
Sky News has learnt that John Worth, who only joined the Co-op Bank a year ago, is expected to leave in the coming weeks.
The hedge funds which assumed near-full ownership of the bank last month are understood to have decided to replace Mr Worth, although it was unclear on Wednesday whether he had formally resigned yet.
A former executive at Barclays, Prudential and Hiscox, the insurer, Mr Worth played an important role in negotiations over the recapitalisation deal struck between the Co-op Bank and its shareholders during the summer.
An obvious candidate to replace him would be Tom Wood, the former Shawbrook finance chief who was appointed as the Co-op Bank’s chief restructuring officer in July.
Mr Wood was installed by a quintet of hedge funds, including Blue Mountain Capital Management and Silver Point, with a mandate to accelerate an overhaul of the company’s operations.
The investors pumped hundreds of millions of pounds into the Co-op Bank – the third equity-raising it had been forced to undertake in four years.
Mr Worth’s departure is likely to raise questions about the future of Liam Coleman, the bank’s chief executive, and Dennis Holt, its chairman, although regulators would be keen to avoid a string of top-level resignations so soon after the deal completed.
Its initial financial restructuring in 2013 led to the hedge funds taking a majority stake in the business.
They now hold 99% of its shares, with the Co-op Group retaining a nominal stake.
Video: Co-op boss explains bank stake write-off
Despite the reduction in the mutual’s holding, the Bank has stressed that its commitment to “values and ethics” will be safeguarded.
If they had not stepped in to provide new capital, the investors faced the alternative of seeing their previous investments being wiped out, with the Bank of England moving in to wind up the lender.
Efforts to find a buyer for the whole of the Co-op Bank failed to elicit a compelling offer from Virgin Money, CYBG or any of the other banks or private equity firms which had considered doing so.
The recapitalisation has provided some reassurance to four million Co-op Bank customers who have faced a protracted period of uncertainty over its future as an independent business.
Existing retail bondholders nevertheless suffered a substantial reduction in the value of their holdings.
Image: The Co-op Bank’s roots can be traced back to 1872
The rescue deal saw the hedge funds pay £250m for new shares and swap £443m of existing debt for equity.
In addition, £100m was invested in the Co-op Bank’s new standalone pension scheme following tensions over the division of the £10bn scheme shared with the Co-op Group.
The Co-op Bank said during the summer that it saw the potential to pay a dividend to shareholders in 2021 if its business plan is delivered over the coming years.
The company has been hit by a string of legacy issues, as well as the challenge posed by ultra-low interest rates, following its disastrous merger with the Britannia Building Society in 2009.
Its former chairman, Paul Flowers, brought it into disrepute when his drug-taking and sexual proclivities were exposed by a tabloid newspaper, while his financial competence was questioned by MPs.
A Co-op Bank spokesman declined to comment.
Source: SKY News