Shares in UK Metro Bank rose 26% after securing fresh capital

  • Britain’s Metro Bank announced late Sunday that it had secured a 325 million pound ($395.6 million) capital increase and a 600 million pound debt refinancing, with Colombian businessman Jaime Jelinsky Bacal becoming its majority shareholder.
  • Some bondholders will take a 40% cut as the bank restructures its debt, while also discussing selling up to £3bn of residential mortgages.
  • Shares rose 26% on Monday morning after volatile trading last week.

Close-up of the British Metro Bank sign.

Matthew Horwood | Getty Images

LONDON – Shares of UK Metro Bank rose sharply on Monday morning, after the bank announced late Sunday that it had secured a £325 million ($395.6 million) capital increase and a £600 million debt refinancing.

The capital increase includes £150m of new equity and £175m of MREL issuance, a form of bailout debt. The bank said it will also undergo a debt restructuring process that will extend the maturity of its loans. Holders of its £250 million Tier 2 bond, due in June 2028, will receive a 40% discount.

Metro Bank shares were up 26% at 9:10 a.m. London time.

The deal comes after investors were spooked last week by news that the bank was looking for a large financing package. Crucial talks took place over the weekend, with several major banks being approached with potential offers, according to multiple reports.

The increase was led by Colombian banker and property developer Jaime Jelinsky Bacal – an existing shareholder through Spaldy Investments Limited – who contributed £102 million to the initiative. Zhilinsky-Pakal is now the controlling shareholder of the bank with a 53% stake.

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“The opportunity to become the bank’s majority shareholder is driven by my belief in the need for physical and digital banking supported by a focus on exceptional customer service,” he said in a statement.

“I believe the package announced today enables the bank to continue to grow and build on the foundational work it has done over the past three years.”

See chart…

Metrobank share price

Metro Bank said the increase would provide the opportunity to shift towards specialist real estate loans and commercial lending, as well as continued growth in current accounts and increased deposits.

The bank also said it was in discussions about selling up to £3bn of residential mortgage loans.

Regulators said last month they were unlikely to allow Metrobank to use its internal risk models for some mortgage loans – raising investor concerns, as this would lead to higher capital requirements.

Shares of the London-based bank were extremely volatile and ended last week down 22.5%, according to LSEG data.

Challenger Bank was launched in 2010 and has a market capitalization of less than £100m. It faced a major blow in 2019 when A.J Major accounting error This led to the resignation of its founder and the imposition of fines on its former CEO and CFO.

A number of rating agencies and investment banks downgraded the bank’s shares amid the turmoil last week, with investment bank Stifel saying it may have capital needs of up to $1 billion over the next two years.

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