UK-Based Metro Bank Strikes Rescue Deal With Investors
Metro Bank (LON: MTRO), a British retail and commercial bank, has struck a rescue deal with investors following reports of…
Metro Bank (LON: MTRO), a British retail and commercial bank, has struck a rescue deal with investors following reports of its struggles to meet capital requirements. The bank has announced a successful rescue agreement with investors, which includes a £325mn capital raise and £600mn of debt refinancing that’ll see bondholders take a 40 to 45% loss on their investments.
The capital raise comprises £150mn of new equity and £175mn of new debt from bondholders. Most of the equity funding — £102mn — is from Spaldy Investments, a holding company of Colombian banking billionaire Jaime Gilinski. Spaldy is currently Metro Bank’s largest shareholder, with a 9.2% stake. Once the deal takes effect, it’ll become a majority shareholder with a 52% stake.
Metro’s chief executive, Daniel Frumkin, will chip in £2mn into the equity infusion. Metro will sell shares at 30 pence per share, a discount to its 45 pence closing price before the announcement.
- Metro Bank’s shares climbed over 20% on Monday after the announcement, boosting its share price to over 50 pence, the same level it traded at before reports of the bank’s financial struggles emerged.
Metro Bank was founded in 2010 by Anthony Thomson, a British entrepreneur, and Vernon Hill, an American businessman. It was the first new retail bank to launch in Britain in 150 years. Early funding came from British and American investors, including Fidelity Investments, hedge fund tycoon Steve Cohen, and billionaire brothers David and Simon Reubens.
Metro reported its first annual profit of £11mn in 2017. The bank swung back to a loss in 2019 as it spent heavily on expansion (revenue grew from £416mn in 2019 to £524mn in 2022). It became profitable again in this year’s first half, posting a £16mn pre-tax gain after tightening costs and benefiting from interest rate hikes.
Metro Bank listed its shares on the London Stock Exchange in 2016. It has struggled since then, highlighting the difficulties of establishing a new retail bank with dozens of branches. Investors have bailed on the company, sinking its market capitalization from £3.5bn in 2018 to around £100mn currently.
- The rescue package will cause significant losses for Metro Bank’s shareholders and bondholders. But customers will be spared the drama and continue banking as usual.