[1/2]People walk past a Metro Bank in London, Britain, May 22, 2019. Portal/Hannah McKay/File Photo Acquire License Rights
LONDON, Oct 8 (Portal) – Struggling British bank Metro (MTRO.L) announced on Sunday a 325 million pound ($396.5 million) capital increase and a 600 million pound debt refinancing, after urgent talks to strengthen its balance sheet over the weekend saw a volatile trading week.
The deal would hand majority shareholder control to its biggest investor, Colombian billionaire Jaime Gilinski, and would deliver a blow to bondholders, who would then move into higher-yielding bonds.
Metro Bank had been trying to stabilize its finances after a series of setbacks in recent years, including accounting errors, executive departures and delayed regulatory approval of key capital relief measures.
The lender, which was set up in 2010 to challenge the dominance of Britain’s major banks, said the capital raising included £150 million of new equity and a £175 million bail-in note, known as “MREL”.
The capital raise was led by Metro’s largest shareholder, Spaldy Investments, a subsidiary of Gilinski, which contributed £102 million. Spaldy will become the majority shareholder with a 53% stake upon completion of the transaction, Metro said.
“The opportunity to become a majority shareholder in the bank is based on 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 restructuring of its debt that will extend the life of its loans, with holders of a £250 million Tier 2 bond from Metro Bank due in June 2028 facing a 40% discount.
Holders of this bond will be swapped into a new bond with a 14% interest rate, while holders of a separate bail-in MREL bond will swap into a new bond with a 12% coupon.
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 £3 billion of residential mortgages.
The Bank of England’s Prudential Regulation Authority said in a statement: “The Prudential Regulation Authority welcomes Metro Bank’s steps to strengthen its capital position.”
Several major banks were contacted by the regulator this week to consider bidding for Metro, including HSBC (HSBA.L) and Lloyds (LLOY.L).
Portal 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 handing over too much control.
($1 = 0.8196 pounds)
Reporting by Iain Withers, Anousha Sakoui in London, additional reporting by Huw Jones and Pablo Mayo Cerquerio in Londo and Lavanya Ahire in Bengaluru; Editing by Lisa Shumaker
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