Embattled British bank Metro (MTRO.L) announced a 325 million pound ($396.5 million) fundraising and 600 million pound debt refinancing on Sunday, following a weekend of urgent talks to shore up its balance sheet after a volatile week of trading.
The deal would hand majority shareholder control to its biggest investor – Colombian billionaire Jaime Gilinski – and be a blow to bondholders, who would then switch to higher-yielding bonds.
Metro Bank has been trying to shore up its finances after a series of setbacks in recent years, including accounting errors, executive departures and delayed regulatory approval for key capital relief.
The lender – which was launched in 2010 to challenge the dominance of Britain’s high street banks – said the capital raise included £150 million of new equity and a £175 million issue of bail-in debt known as ‘MREL’.
The equity raise was led by Metro’s largest shareholder, Gilinski-owned Spaldy Investments, which contributed £102 million. Spaldy will become the controlling shareholder on completion of the transaction, Metro said, with a 53% stake.
“The opportunity to become the bank’s largest shareholder is driven by my belief in the need for physical and digital banking, underpinned by a focus on exceptional customer service,” Gilinski said in a statement.
The deal also includes a debt restructuring that will extend the maturity of its borrowings, with holders of a £250m Metro Bank Tier 2 bond due in June 2028 taking a 40% haircut.
Holders of this bond will be swapped into a new bond paying 14% interest, while holders of a separate bail-in MREL bond will be swapped into a new bond paying 12% interest.
The fundraising is expected to be completed in the fourth quarter, subject to shareholder and bondholder approval.
The bank also said it was in talks to sell up to £3bn of residential mortgages.
The Bank of England’s Prudential Regulation Authority said in a statement: “The Prudential Regulation Authority welcomes the steps taken by Metro Bank to strengthen its capital position.”
Several major banks have been approached by the regulator this week to consider a bid for Metro, including HSBC (HSBA.L) and Lloyds (LLOY.L).
Reuters reported on Friday that Metro Bank would discuss financing options with its shareholders over the weekend, after a proposal from bondholders earlier in the week was seen as giving up too much control.
