Metro Bank secures fresh financing in ‘new chapter’ for troubled lender

Metro Bank has secured a bumper package of fresh financing, with the lender declaring a ‘new chapter’ in its history and promising shareholders ‘significant’ growth ahead.

The bank told shareholders on Monday it had secured a £325million capital raise and £600million of debt refinancing, ‘enhancing balance sheet strength and accelerating earnings potential’.

It also confirmed it is in discussions regarding the sale of up to £3billion of residential mortgages, providing further breathing space on its balance sheet.

Chief executive Daniel Frumkin said the fresh financing ‘marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years’.

Metro Bank told shareholders on Monday it had secured a £325million capital raise and £600million of debt refinancing

A spokesperson at the Bank of England’s Prudential Regulation Authority said the watchdog ‘welcomes the steps taken by Metro Bank to strengthen its capital position’.

The deal involves a £150million equity raise led by Spaldy Investments, which becomes Metro Bank’s largest shareholder with a £102million contribution and gathering a 53 per cent shareholding.

It will see a share placing at 30p per share, which is expected to complete in the final quarter of this year, ‘underpinned by equity commitments from a number of existing shareholders and new investors’, the group said.

However, the deal will see shareholders and bondholders take a financial hit. 

The equity raise is priced at a heavy discount to Friday’s closing price of 45p per share, and holders of Metro Bank’s £250million ‘tier-2’ bond will take a haircut of 40 per cent before switching into higher paying securities. 

Jaime Gilinski Bacal, founder of Spaldy Investments, said: ‘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.

‘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.’

The refinancing also extends the call date of a portion of Metro Bank’s debt pile to 2028.

Metro Bank said the deal ‘provides opportunity to grow assets significantly over the coming years’, with the lender planning to refocus its efforts towards ‘specialist mortgages’ and commercial lending ‘to optimise adjusted returns’.

It emerged over the weekend that Metro Bank has called in consulting giant Ernst & Young in efforts to find a buyer.

Banking heavyweights JP Morgan Chase and HSBC are both understood to have considered a bid for the challenger bank before deciding against it because of concerns about the extra capital any new buyer would have to put in.

Santander UK is also being advised by George Osborne’s firm, Robey Warshaw, about mounting a takeover, according to reports by Sky News.

Its shares crashed last week after the bank confirmed that it was seeking to bolster its capital position. 

Metro Bank, which listed in 2016 at £20 per share, fell by as much as 32 per cent on Thursday, ending the day at 37.5p with a valuation of less than £65million. It recovered some ground the next day on reports it was looking to offload its mortgage book

It recently rejected a takeover approach by Shawbrook, a so-called challenger bank.

Metro, which has 2.8m customers and 76 branches, needed cash to refinance a £350million debt within a year.

The bank also told shareholders on Monday that it had seen positive trading in the third quarter, with a statutory profit after tax and ‘continued momentum’ in personal and business current account growth and customer acquisition.

Mr Frumkin added: ‘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.’

This post first appeared on Dailymail.co.uk