Virgin Money rules out Co-op Bank takeover

Co-op Bank

Virgin Money has pulled out of talks to buy the Co-op Bank as the firm negotiates with hedge funds about a financial restructure.

Virgin walked away from the mooted deal in the last few days, according to Sky News.

The Richard Branson-backed lender had been seen as the most likely firm to attempt a takeover of the Co-op.

Santander and Banco Sabadell both both ruled themselves out of bidding for the Co-op in March.

The hedge funds the Co-op is negotiating with includes Blue Mountain Capital Management, Cyrus Capital Partners, GoldenTree Asset Management and Silver Point.

The bank wants to sell to increase its capital reserves to meet regulatory requirements.

A stock exchange announcement in February said: “The bank has always been clear that, although it meets its Pillar 1 regulatory capital requirements and expects to continue to do so, it needs to build its capital and meet longer term UK bank regulatory capital requirements.

“Its capacity to do so organically has been constrained by the impact of interest rates that are lower than previously forecast, reducing the bank’s ability to generate income, and by higher than anticipated transformation and conduct remediation costs.”

The Co-op announced 2016 losses of £477m in March this year.