Co-operative Group strikes agreement in principle but loses majority control of bank

LONDON – Co-operative Group, the U.K.'s biggest mutual business, says it will retain "effective control" of its banking unit after agreeing a restructuring that will give bondholders a 70 percent stake in the lender.

Chief executive Officer Euan Sutherland said Monday that the group will retain 30 percent of Co-operative Bank, making it the single largest shareholder. Fuller details of the agreement in principle will emerge in the coming days.

The restructuring took place as the bank had to plug a 1.5 million pound hole in its finances. Though the Co-op wanted to retain control with a rescue that converts some bonds into stock, investors demanded majority ownership.

The bank's difficulties arose from poor commercial loans taken on in a merger with the Britannia building society in 2009.