Metro Bank reached a deal on a financing package which will include a £325m capital raise and £600m in debt refinancing late Sunday after a tumultuous week.
Since the deal was announced, shares have risen 10%. Within the £325m, £150m is new equity and £175m will go to the bank’s MREL assurance, funds dedicated to absorbing losses if the bank were to experience failure.
The funds will allow the bank to escape the CRD IV combined buffer which has put the bank in a state of flux over the past weeks. In September, the Bank of England denied Metro’s request to use its own models to assess assets, putting Metro at risk of falling out of capital requirements.
The deal also extends Metro’s £350m MREL initial call date of October 2024 to a due date of April 2029.
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£102m on the equity raise was financed by Spaldy Investments, founded by Columbian banking and real estate entrepreneur Jaime Gilinski Bacal, who holds a net worth of $5.3bn, according to Forbes. Bacal becomes the majority shareholder of Metro Bank with the investment at 53%.
“I have been an active investor in Metro Bank since 2019. 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,” Bacal said.
“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 said shares will be sold at 30p, a discount that will cause “material dilution” for current shareholders. Tier 2 bond holders at Metro bank will also experience a 40-45% “haircut”.
Metro Bank is also currently debating an asset sale of residential mortgages, which could total up to £3bn. It would plan to reinvest the funds in cash to accelerate earnings growth.
Daniel Frumkin, CEO of Metro Bank, said: “Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years. Metro Bank made a statutory profit after tax in Q3 2023, and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank.
“Our strong franchise is underpinned by our loyal customer base and engaged colleagues and we will continue to develop the Metro Bank offer to provide the digital and physical banking services our customers expect. We thank our shareholders and noteholders for their continuing support of Metro Bank and our customers,” Frumkin said.
Metro Bank has functioned in the UK since 2010, holding about £15.5bn.