- Britain’s Metro Bank said late Sunday it had secured a 325 million pound ($395.6 million) capital increase and a 600 million pound debt restructuring as Colombian businessman Jaime Gilinski Bacal joined it becomes the majority shareholder.
- Some bondholders will take a 40% discount as the bank restructures its debt while discussing selling up to £3 billion of residential mortgages.
- After volatile trading last week, shares were up 26% on Monday morning.
A close-up of a UK Metro Bank sign.
Matthew Horwood | Getty Images
LONDON – Shares in Britain’s Metro Bank rose sharply on Monday morning after the lender announced late Sunday that it would undertake a 325 million pound ($395.6 million) capital increase and a 600 million debt restructuring secured millions of pounds.
The capital increase includes £150m of new equity and £175m of “MREL” issues, a form of bail-in debt. The bank said it will also undergo a debt restructuring that will extend the life of its loans. Holders of the £250 million Tier 2 bonds due June 2028 will face a 40% discount.
Metro Bank shares were up 26% at 9:10 a.m. London time.
The deal comes after investors were rattled last week by news that the bank was seeking a large financing package. According to several reports, important discussions took place over the weekend, with several major banks being approached for possible offers.
The capital raise was led by Colombian banker and property developer Jaime Gilinski Bacal – an existing shareholder through Spaldy Investments Limited – who contributed £102m to the initiative. Gilinski Bacal is now the bank’s majority shareholder with a 53% stake.
“The opportunity to become the bank’s majority shareholder is based on my belief in the need for physical and digital banking and the focus on exceptional customer service,” he said in a statement.
“I believe the package announced today will enable the bank to drive growth and build on the foundational work of the last three years.”
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Metro Bank share price.
According to Metro Bank, the increase provides the opportunity to move into specialty mortgages and commercial loans, as well as continue current account growth and increase deposits.
The bank also said it was in talks to sell up to £3 billion of residential mortgages.
Last month, regulators said they were unlikely to allow Metro Bank to use its own internal risk models for some mortgages – raising concerns among investors as it would lead to higher capital requirements.
Shares of the London-based bank have been extremely volatile, closing last week down 22.5%, according to LSEG data.
The challenger bank was founded in 2010 and has a market capitalization of less than £100 million. In 2019, the company suffered a major setback when a major accounting error led to the resignation of its founder and fines for its former CEO and CFO.
A number of ratings agencies and investment banks downgraded the bank’s shares last week amid the turmoil. Investment bank Stifel said it may need capital of up to a billion over the next two years.