Struggling Co-operative Bank said it is no longer up for sale and will continue to negotiate with investors as it nears a rescue deal with a number of US hedge funds.
The loss-making lender said on Monday (26 June) that it had shelved plans to sell its whole business, after putting itself up for sale in February this year following warnings it would miss the banking regulator's capital threshold.
The Manchester-based bank spent the last four months in negotiations with a number of potential suitors, from a series of unspecified UK challenger lenders to a Qatari-Swiss consortium, but has now decided to call the talks off.
It is understood the Co-op Bank is close to securing a £700m ($892m) deal with a group of US hedge funds, including Silver Point Capital, Blue Mountain, Cyrus Capital Partners and Golden Tree Asset Management.
The bank said that the discussions with the investors were at an advanced stage, adding that the proposal, if implemented, would "enable the bank to meet the longer term capital requirements applicable to all UK banks [...] and continue as a standalone entity. The proposal would also safeguard the bank's value and ethics."
Last week, the beleaguered lender revealed it was in negotiations with a group of existing investors, over a possible sale.
However, disagreements over funding its pension liabilities were thought to pose an obstacle to the deal, as the investors' offer to put £200m into the bank's pensions pot was not deemed sufficient to protect the 90,000 members by the Co-op Group, which owns a 20% stake in the bank.
Co-op has £800m of liabilities from the Britannia pension scheme after it acquired the building society in 2009, plus a share of the £8bn Co-op Group scheme.
In April, the London-listed company, which had previously valued its share at £140m, wrote down the stake's entire value to zero. A month earlier, the bank, which has four million customers, reported an annual loss of £477m, bringing its cumulative losses over the last five years to more than £2.7bn.
While the bank cut its costs by 20% within 12 months of its bailout in December 2013, when it was rescued by a host of hedge funds which took control of a 70% stake, it has failed to properly get back on its feet.
Since failing the Bank of England's stress test in 2014, Co-op bank has been closely watched by regulators while it tries to restore its capital to an acceptable level.