Metro Bank Holdings Plc is closing in on a provisional agreement with investors over a financing package, according to people with direct knowledge of the deal.
The agreement would buy the lender some much-needed breathing space after a tumultuous week that saw its share price whipsaw and EY approach a number of lenders to submit offers for Metro Bank before the markets opened on Monday.
The proposed deal involves both bondholders and shareholders, the people familiar said, who asked not to be identified discussing private information. The terms of the agreement couldn’t immediately be learned and it wasn’t clear whether the Bank of England’s Prudential Regulation Authority had approved the deal. The situation remains fluid with asset sales also on the table and it is possible a buyer may still swoop in.
Spokespeople for Metro Bank, the PRA and PJT, which is advising bondholders, declined to comment. The lender’s largest shareholder Jaime Gilinski could not be reached for comment.
Bondholders had been in talks with Metro Bank about an equity injection by existing investors that would be carried out alongside a debt restructuring, people familiar with the matter said Saturday. That 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.
Under the 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. The bond due in 2025 will 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.
Read More: Metro Bank in Talks for Debt Restructuring, Equity Injection
The agreement marks the latest development in a frantic weekend of talks, which also saw EY hired to find a buyer, people familiar said earlier. JPMorgan Chase & Co. was among the lenders to explore a deal although it decided not to proceed.
Read More: EY Approaches Lenders in Push to Find Metro Bank Buyer
Metro Bank, which was co-founded by Vernon Hill, opened its doors in 2010 and is one of the most prominent British challenger banks that emerged to take on incumbents such as Barclays Plc and Lloyds Banking Group Plc. While others focused on expanding their online banking offerings, the firm has become known for building a branch network, including in expensive locations like the King’s Road in Chelsea.
The bank, which had £22 billion of total assets at the end of June, had a market value of about £78 million, compared with £3.2 billion at the end of 2017. The lender has 76 branches and 2.8 million customer accounts, according to its half-year results.
“The company continues to consider how best to enhance its capital resources, with particular regard to the £350 million senior non-preferred notes,” Metro Bank said in a statement on Thursday. “The company is evaluating the merits of a range of options.”
Read More: Metro Bank’s Hectic Week Came After Months of Slow-Burn Concern
Willett Advisors LLC, the investment arm for the personal and philanthropic assets of Michael Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP, held shares in Metro Bank as of November 2021, according to a regulatory filing.
--With assistance from Ezra Fieser, Katherine Griffiths and Giulia Morpurgo.
Author: Leonard Kehnscherper, Jan-Henrik Förster and Ruth David