Metro Bank Holdings Plc is in discussions over a financing package with its bondholders and shareholders with the aim to reach any agreement before Monday, according to a person familiar with the matter.
Bondholders have been in talks with Metro Bank about an equity injection by existing investors that would be carried out alongside a debt restructuring, the person said, who asked not to be identified discussing private matters. The proposal would extend the maturity of its outstanding senior debt and convert the subordinated debt into equity. Shareholders will need to inject new equity to avoid a severe dilution.
The situation is fluid and an agreement may not be reached. As well as trying to hammer out a deal with equity and debt holders, Metro Bank is continuing to consider other options such as selling mortgage assets in order to free up capital.
A spokesperson for Metro Bank declined to comment. The lender’s largest shareholder Jaime Gilinski could not be reached for comment. Representatives for PJT, which is advising bondholders, declined to comment.
Under the bondholder scenario, Metro’s £250 million ($306 million) tier 2 notes would be converted into equity and the maturity of £350 milllion of senior bonds due 2025 extended. Existing bond and equity holders are considering whether they want to inject more money into the bank given its challenges over growth and costs while weighing that against the risk some could face a wipe out if Metro Bank’s situation deteriorates seriously.
The bond due in 2025 would cease counting toward MREL — Minimum Requirement for Own Funds and Eligible Liabilities — purposes when its maturity date is less than twelve months away, hence a refinancing should happen before October next year.
Metro was previously approached about a possible merger with fellow mid-tier bank Shawbrook, but those talks did not progress. Still, other bidders could emerge for Metro, either among the medium-sized banks or from a large bank, several people close to the situation said. The bank is working with adviser Morgan Stanley on its options.
Author: Jan-Henrik Förster, Katherine Griffiths and Giulia Morpurgo