Aurelius Capital, the largest hedge fund investor in the Co-op Bank, has sold down almost its entire stake to rival Perry Capital.
Aurelius was a key player in the negotiations which eventually culminated in the bank's abandoning of its mutual structure as it plugged a £1.5bn black hole last month.
However, the hedge fund decided to sell its bond holdings due to the better-than-expected performance of the debt subsequent to that agreement, according to the FT.
Perry Capital is now locked in to the restructuring under current terms, and will also support a legally-binding agreement to back the Co-op's ethical policies, according to the paper.
Last month the Co-op agreed to hand investors in its lower tier two bonds a 70% equity stake as part of its restructuring agreement. Today marks the 'first round' deadline for Co-op creditors to agree to the restructure.
Aurelius is thought to have agreed the sale of the bonds before the scandal involving chairman Paul Flowers came to light.
Flowers is under investigation by the police after being filmed while allegedly buying illegal drugs.
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