- The U.K.’s Metro Bank on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing, as Colombian businessman Jaime Gilinski Bacal becomes its majority shareholder.
- Some bondholders will take a 40% haircut, as the bank restructures its debt, while also discussing the sale of up to £3 billion of residential mortgages.
- Shares were up 26% Monday morning after volatile trade last week.
LONDON — Shares of the U.K.’s Metro Bank were sharply higher Monday morning, after the lender on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing.
The capital raise includes £150 million of new equity and £175 million of “MREL” issuance, a form of bail-in debt. The bank said it will also undergo a debt restructuring that will extend the maturity of its borrowings. Holders of its £250 million of tier 2 bonds, due in June 2028, will take a 40% haircut.
Metro Bank shares were 25.5% higher at 10:28 a.m. London time.
The deal comes after investors were last week spooked by news that the bank was searching for a large financing package. Crunch talks took place over the weekend, with several large banks approached for potential offers, according to multiple reports.
The raise was led by Colombian banker and real estate developer Jaime Gilinski Bacal — an existing shareholder through Spaldy Investments Limited — which contributed £102 million to the initiative. Gilinski Bacal is now the bank’s controlling shareholder with a 53% stakehold.
“The opportunity to become the bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service,” he said in a statement.
“I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”
Metro Bank said the raise will provide the opportunity to shift towards specialist mortgages and commercial lending, as well as continuing growth in current accounts and raising deposits.
The bank further said it is in discussions over the sale of up to £3 billion of residential mortgages.
Regulators last month said they were unlikely to allow Metro Bank to use its own internal risk models for some mortgages — raising concerns for investors, as this would result in higher capital requirements.
Shares of the London-based bank were highly volatile and finished 22.5% lower last week, according to LSEG data.
The challenger bank launched in 2010 and has a market capitalization of less than £100 million. It faced a major blow in 2019 when a major accounting error resulted in the resignation of its founder and in fines for its former CEO and CFO.
A number of ratings agencies and investment banks downgraded the bank’s stock amid the turbulence last week, with investment bank Stifel saying it may have capital needs of up to a billion over the next two years.
“Not the best possible outcome for shareholders and bondholders by any stretch but it does secure [Metro Bank]’s longevity as an independent institution and no one loses everything,” John Cronin, head of financials research at Goodbody, said in a note Monday.
Cronin said that the capital package still requires support from these parties, with bondholders taking a “deep haircut” and shareholders suffering material dilution under the current deal terms. However, he said recent deposit outflows and the challenges of coming up with an alternative plan quickly may push the deal over the line, even if they “feel aggrieved at this outcome.”
Source: Finance - cnbc.com
