Metro Bank Holdings Plc has agreed to a £925 million ($1.1 billion) financing package, a deal that will impose a 40% haircut on some bondholders and see Colombian financier Jaime Gilinski take a controlling interest.
The agreement buys the lender some much-needed breathing space after a tumultuous week that saw its share price whipsaw and EY approach a number of lenders to submit offers before the markets opened on Monday.
The package consists of a £325 million capital raise and £600 million of debt refinancing, the bank said in a statement Sunday, confirming an earlier Bloomberg report. The fresh capital involves £150 million of new equity and £175 million of new bail-in bonds due in 2028 that’s supported by existing investors.
The equity raise will be led by Gilinski’s Spaldy Investments, Metro Bank’s largest shareholder, which is contributing £102 million. Spaldy will become the controlling shareholder of Metro Bank with a stake of about 53%, up from 9.2%.
As part of the deal, Metro will force a 40% writedown of the £250 million of tier 2 bonds — the most junior in its capital structure — and extend the remainder through to 2034.
The £350 million of senior bonds that counts toward MREL, or Minimum Requirement for Own Funds and Eligible Liabilities, purposes will all be extended to 2028. Existing investors will also provide an additional £175 million of such bonds.
The bank wants to apply an extra haircut on both bonds if less of 75% of the investors sign up to the deal by Friday.
Residential Mortgages
Metro Bank said it is also in discussions regarding an asset sale of as much as £3 billion of residential mortgages, which would reduce risk-weighted assets by £1 billion.
The lender also said the agreement would:
- deliver a pro forma CET1 ratio in excess of 13% as of June 30, 2023 and an MREL ratio in excess of 21.5%;
- support Metro Bank’s delivery of return on tangible equity in excess of 9% in 2025 and low double-digit to mid-teens over the medium term.
“I have been an active investor in Metro Bank since 2019,” Gilinski said in the statement. “The package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.” Daniel Frumkin, Metro Bank’s chief executive officer said the announcement marks a new chapter for Metro Bank.
The PRA said in a separate statement it welcomed the move.
Read More: Metro Bank in Talks for Debt Restructuring, Equity Injection
The agreement, which is expected to complete in the fourth quarter, marks the culmination of a frantic weekend of talks, which also saw EY hired to find a buyer. JPMorgan Chase & Co. was among the lenders that considered exploring a deal although it decided not to proceed.
Metro Bank, which was co-founded by Vernon Hill, opened its doors in 2010 and is one of the most prominent British challenger banks that emerged to take on incumbents such as Barclays Plc and Lloyds Banking Group Plc. While others focused on expanding their online banking offerings, the firm has become known for building a branch network, including in expensive locations like the King’s Road in Chelsea.
The bank had £22 billion of total assets at the end of June and a market value of about £78 million on Friday, compared with £3.2 billion at the end of 2017. It has 76 branches and 2.8 million customer accounts, according to its half-year results.
Read More: Metro Bank’s Hectic Week Came After Months of Slow-Burn Concern
Willett Advisors LLC, the investment arm for the personal and philanthropic assets of Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, held shares in Metro Bank as of November 2021, according to a regulatory filing.
--With assistance from Ezra Fieser, Katherine Griffiths, Giulia Morpurgo and Neil Callanan.
Author: Leonard Kehnscherper, Jan-Henrik Förster and Ruth David
