London - The Co-operative Bank announced plans on Monday to close 50 of its branches and axe a "significant" number of jobs in a rescue plan that hands bond investors majority control.
Parent company The Cooperative Group said in a statement that investors who purchased bonds in its loss-making banking division - including US hedge funds - will be given 70%, leaving it with a minority 30% stake.
Cooperative Group chief executive Euan Sutherland admitted that there would be "significant" job losses as a result of the closures, which comprise 15% of the bank's 324-branch network.
The British consumer cooperative sought to assure customers that its ethical values would remain "legally embedded" in its constitution, despite the announcement.
Monday's revised rescue plan aims to plug a 1.5bn ($2.4bn, €1.8bn) black hole in its finances, caused by the purchase of the Britannia Building Society in 2009 and the collapse of a deal to buy 632 Lloyds Bank branches.
"Today we have taken a major step forward towards achieving our plan to secure the future of the bank, putting in place an agreement with a number of our leading investors on a comprehensive plan that will raise the necessary 1.5bn of capital," said Sutherland in the statement.
"The financial position of the bank means that all stakeholders will have to make a contribution but in delivering this agreement we have worked hard to balance the distinct needs of all those affected."
The Co-operative said it would inject 462m into the lender, with a further 125m coming from the so-called "LT2 Group" of investors, predominantly comprising US hedge funds.
The move was required by City regulators owing to heavy losses at the bank, including a half-year loss of 709.4m in the first six months of this year after its takeover of Britannia.
The development has sparked concern from some quarters about whether the bank would be able to retain the ethical approach which had attracted many of its customers.
However, Sutherland insisted that the Co-operative Group will remain the largest single shareholder, giving it a"key role in shaping the bank's future direction".
"We recognise the huge importance of ethics and values for all our customers and remain committed to upholding them," he added.
The rescue plan includes investment in digital and self-service banking and will see the focus shift to retail customers and small and medium-sized businesses.
The turnaround, which is planned over four-to-five years, aims to reduce risk, secure long-term cost-savings and restore growth, the bank said.
Investors must now vote to back the plan, with the group warning that the bank will fall into state hands if they fail to do so.
The LT2 group, whose members had bought bonds in the troubled bank, includes US hedge funds Aurelius Capital Management and Silver Point Capital.
Niall Booker, the bank's chief executive, said the hedge funds' influence was "not as nefarious as people like to make out".
He admitted that there was a long way to go before the bank was out of troubled waters.
"The bank has already taken a number of steps to address the challenges it faces. It is clear, however, that there is a significant task ahead; we are only in the very early stages of turning the business around.
"The legacy issues we are working hard to overcome will continue to have an impact on the bank for some time."