RBS sends top troubleshooter into the Co-op

Bob Hedger, a Royal Bank of Scotland specialist in business turnarounds, has been parachuted into the Co-op by its banking syndicate to help the group as it faces questions over its future after last week reporting a £2.5bn loss, the worst result in the mutual’s 150-year history.

RBS is one of six lenders to the Co-op, which has seen its debt pile more than double in the last four years after a series of acquisitions, including the disastrous takeover of the Somerfield supermarket chain.

At present, the Co-op would have to borrow much of the £120m it will need to maintain its 30pc stake in the bank after it last year ceded control of the lender to its bondholders after an emergency £1.5bn recapitalisation of the business. That followed the discovery of a black hole in its balance sheet.

Lord Myners, the former City minister, has conducted a review of the governance of the Co-op and the mutual’s members will next month be presented with reforms designed to improve the group’s management.

Mr Hedger is understood to be backing the reforms against criticism from some of the mutual’s largest member groups, which have accused Lord Myners of attempting to turn the group into a plc-style operation. He quit as a Co-op director a fortnight ago in the face of opposition to his reforms.

The Co-op’s lenders have as yet avoided becoming directly involved in the fight even though the mutual has become dependent on them for its working capital.

As well as losing control of its banking arm and selling off large parts of its insurance business, the Co-op is also exploring a sale of its pharmacy chain and its farms. The sales are expected to help the group cut its debt. Its acting chief executive, Richard Pennycook, has warned that the Co-op’s borrowings are far too high for a business without access to equity capital.

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