The Richard Branson owned Virgin Money has withdrawn from the list of suitors hoping to snap up the ailing co-op bank.
Virgin Money has followed in the wake of the Spanish banks Banco Sabadell and Santander who also announced that they were exiting negotiations involving the sale of the bank, along with TSB bank.
The revelation by Virgin Money of it leaving buy-out negotiations will further heap pressure on the Co-Op bank as the company is engaged in a desperate search to find a buyer, so that it can avoid being closed down by the Bank of England in a process the government body calls a ‘resolution process’.
Virgin Money had been seen as the most likely bidder for the Co-op Bank, but the prospects had diminished in recent weeks with the latter’s decision to hire advisers to work on a debt restructuring.
One source close to the process insisted that the discussions between Virgin Money and the Co-op Bank could still be revived.
Sky News has also learnt that the group of hedge funds with which the Co-op Bank is negotiating includes Cyrus Capital Partners and Blue Mountain Capital Management, two US-based investors with significant exposure to the struggling lender.
They are being represented, alongside GoldenTree Asset Management and Silver Point, by PJT Partners.
Sky News revealed last week that the bondholders – some of which are also shareholders – have lodged a proposal to inject fresh capital into the Co-op Bank.
An insider said on Monday that reports suggesting they were in advanced discussions about a deal was an exaggeration.
Details of their proposal remain unclear, although it would involve the provision of a smaller sum than the £300m of new equity that the Co-op Bank had previously signalled it would require.