Dallas-Based Hedge Fund Buys Co-op Bank Stake
A Dallas-based hedge fund boss who made millions of dollars from the 2007 US housing crash has snapped up a stake in the struggling Co-operative Bank.
Sky News has learnt that Hayman Capital Management is one of a group of City and Wall Street investors which were assigned shares in the Co-op Bank as part of a £400m fundraising aimed at shoring up its finances.
Hayman Capital is headed by Kyle Bass, whose prominence in the US financial sector is partly a consequence of his foresight in predicting - and profiting from - the crisis in the US housing market which was among the causes of the wider global economic slump.
It is understood to be acquiring a small number of shares in the Co-op Bank, which have become available because some existing investors such as the Co-op Group have elected not to take up their full allocation in the new fundraising.
The Co-op Group owned the entirety of its banking arm until last year, when the discovery of a £1.5bn black hole in the lender's balance sheet forced it to shrink its ownership interest, ceding control to bondholders such as the US hedge funds Perry Capital and Silver Point.
Until the £400m cash call, the Group owned 30% of its banking arm, but that stake has now fallen to just over 20% as the troubled mutual seeks to conserve funds to resolve its broader problems.
Although the bank's principles are enshrined in a new constitution, the emergence of further hedge funds on its share register underlines the extent to which it is now removed from its original ownership.
At the weekend, representatives of the Co-op's regional boards and independent societies voted unanimously to back reforms of its governance and management proposed by the former City minister Lord Myners.
The Group still owes more than £250m to the bank as part of its earlier initial fundraising, and is examining the sale of assets including its pharmacies business to raise money.
The bank's ability to continue using the Co-op name could be jeopardised if the Group's stake fell below 20%.
The need to raise an additional £400m emerged in March as the legacy of past insurance mis-selling, IT glitches and other problems continues to haunt the mutual.
A report published last month by Sir Christopher Kelly, a former civil servant, castigated the former management of the Co-op Bank, pinning much of the blame for its £1.3bn loss in 2013 on the decision to merge with the Britannia Building Society in 2009.
A string of other inquiries are also under way into the crisis, although the Financial Conduct Authority and Prudential Regulation Authority are unlikely to complete their reports for some time.
Up to £5m in bonuses owed to former Co-op Bank directors have been withheld, although its ability to claw back money already paid to them is severely restricted.
A Co-op Bank spokesman declined to comment.