Metro Bank, one of the UK’s “challenger” banks, has announced a deal that will strengthen its financial position and allow it to continue its expansion plans. The deal involves raising £325m from investors and refinancing £600m of debt.
The bank, which was founded in 2010 and has 2.7 million customers, has faced several challenges in recent years, including an accounting scandal in 2019 and regulatory scrutiny over its valuation of its assets.
The deal comes after newspaper reports suggested that the bank needed to raise cash urgently and that some rivals were considering bids for part of its business. The bank has denied these claims and said that its finances remain strong.
New funding from existing and new shareholders
The bank said that it had secured a capital raise of £325m from existing shareholders and new backers. The capital raise was oversubscribed, meaning that there was more demand than supply for the shares.
The largest contributor to the capital raise was Spaldy Investments, an investment vehicle owned by Colombian billionaire investor Jamie Gilinski Bacal. Spaldy, which is already the bank’s biggest shareholder, will invest £102m and increase its stake in the bank to 53%.
The bank said that the capital raise will improve its capital ratios, which measure its financial strength and ability to absorb losses. The bank also said that the capital raise will support its growth strategy, which includes opening 11 more branches across the north of England in 2024 and 2025.
Debt refinancing with lower interest rates
The bank also said that it had refinanced £600m of debt with lower interest rates and longer maturities. The debt consists of two bonds that were issued in 2016 and 2018 and were due to mature in 2022 and 2024 respectively.
The bank said that the debt refinancing will reduce its annual interest payments by £15m and extend its debt maturity profile by three years. The bank also said that the debt refinancing will enhance its liquidity position and reduce its funding costs.
The bank said that the debt refinancing was supported by a group of institutional investors, including some of its existing bondholders.
A new chapter for the troubled lender
Metro Bank’s chief executive Daniel Frumkin said that the deal marked “a new chapter” for the troubled lender. He said that the deal will enable the bank to continue developing its offer for its loyal customers and engaged colleagues.
He also said that the deal will make the bank more profitable over the coming years and deliver value for its shareholders.
The Bank of England, which had been monitoring the situation closely, welcomed the announcement. The regulator said that it was pleased with the outcome of the deal and that it will continue to work with Metro Bank to ensure its safety and soundness.
