Co-op Group Stake In Its Bank 'Falls To 20%'
The Co-op Group is to see its stake in the struggling banking arm cut to around 20%, according to Sky sources.
The parent group currently has a 30% stake.
Sky News City Editor Mark Kleinman said that if the Co-op Group's holding in the bank falls below a fifth, it may affect the lender's use of the Co-op name.
Some £400m is to be raised through the issue of 200 million new ordinary shares, if approved by shareholders, according to a statement released on Friday.
Four major shareholders have agreed to take 31% of the new shares.
Approval must be gained at the annual general meeting in June.
The embattled mutual has not officially revealed to what extent its holding in the bank will be reduced after the share issue, but it said it expects to remain the single largest shareholder.
It recently revealed the group lost £2.5bn last year, on the top of a £599m loss in 2012.
The bank made a record loss in 2013 of £1.3bn.
A £1.5bn capital black hole was discovered in the bank's finances - partially blamed on its purchase of the Britannia Building Society - which saw the group's stake reduced to 30%.
The recapitalisation by bondholders, weakening the mutual's shareholding, saw US hedge funds increase their stake.
In the statement released on Friday, the bank said chairman Richard Pym would step down before the end of this year.
"The Co-operative Group notes today's announcement from the Co-operative Bank in relation to its £400m capital raising and confirms its participation, as described in the Bank's announcement," the parent group said.
"While the size of the Group's shareholding will be reduced following the capital raising, we will retain a significant stake and expect to remain the single largest shareholder."
It added: "The Group remains supportive of the bank and its strategy."