Co-op Bank's bondholders give go-ahead to recapitalisation The Co-operative Bank's institutional bondholders have approved a sweeping recapitalisation of the lender, removing one of the final obstacles to the £1.5bn restructuring. The debt exchange must be approved in court on Wednesday ahead of the proposed completion by the end of this week. The recapitalisation - the only way for the stricken Co-op Bank to avoid collapse - will hand a 70 per cent equity stake to bondholders, reducing the Co-operative Group's share to 30 per cent. The process was triggered in June after regulators ordered the bank to raise £1.5bn of fresh capital to plug a hole in its balance sheet. Last month the Co-op secured support from its army of more than 10,000 retail investors, who will suffer big losses after their existing bonds are swapped for new lower value debt in the Co-op Group. The Co-op said on Tuesday that 625, or 97.6 per cent, of its larger creditors - including the hedge funds represented by the LT2 bondholder group - submitted their votes on Monday. Of those, 617 - or 99.9 per cent - voted in favour of the recapitalisation, it said. The LT2 group, and its advisers - Moelis, the investment bank, and Shearman & Sterling, the law firm - led the bank recapitalisation talks with the Co-op after initially blocking a less attractive offer from the mutual. The voting process has coincided with a difficult period for the Co-op Bank, after its former chairman, Paul Flowers, was filmed allegedly buying illegal drugs. That followed the exposure of severe losses at the business as a result of mounting bad debts, as well as charges for mis-sold payment protection insurance and a botched IT upgrade. The bank - and its parent Co-op Group - are now subject to multiple reviews as regulators and the new management team try to discover how the banking arm lost its way so badly. Last week the Co-op Group appointed Lord Myners, the former Labour City minister, as the group's first independent chairman and asked him to oversee an in-depth review of governance. Both the Co-op's group and bank chairmen have resigned as a result of the lender's troubles. The Co-op Group is planning to radically overhaul its board and the outdated process by which it appoints members. The Co-op Group has also asked Sir Christopher Kelly, a former civil servant, to lead an internal review into the emergence of problems at the bank, while financial regulators are also examining the issues.