Metro Bank announces £925m capital package, looking at mortgage sale

(Sharecast News) - Metro Bank announced a robust capital and debt restructuring package totalling £925m on Monday, after a week of market chatter and reports around its capital position, although some current stakeholders will be taking a 40% haircut. It also confirmed it was looking at a sale of its residential mortgage portfolio.

The bank said the strategy included a £325m capital raise and a £600m debt refinancing package and would lift its Common Equity Tier 1 (CET1) capital by around £200m.

Additionally, the maturity of its debt securities was extended to April 2029 and April 2034 for the new MREL Senior Instrument and the new Tier 2 instrument, respectively.

Existing shareholders pledged £150m of new equity, whereas noteholders subscribed to £175m in a new MREL senior instrument, establishing a resilient backbone for the bank's stability and future explorations.

The bank said the debt refinancing involved a 40% haircut on the notional amount of the Tier 2 Instrument, potentially rising to 45% dependent on noteholder participation in lock-up agreements.

It said the remaining notional amount of the Tier 2 Instrument would be exchanged on a par for par basis for a new 10NC5 Tier 2 instrument, with a coupon of 14%, extending the financial stability further into the future.

Separately, Metro Bank confirmed discussions to sell up to £3bn of residential mortgages, which would be reinvested into cash at a higher yield.

Metro Bank said the capital package included a £150m firm placing at 30p per share, expected to conclude in the fourth quarter, as well as a debt refinancing and maturity extension strategy, expected to achieve 75% noteholder participation and subsequently complete in the fourth quarter.

It also included a new MREL raise involving £175m of new fixed-rate senior non-preferred notes, also targeted for completion in the last quarter of the year.

"Today's announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years," said chief executive officer Daniel Frumkin.

"Metro Bank made a statutory profit after tax in the third quarter and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK's number one community bank.

"Our strong franchise is underpinned by our loyal customer base and engaged colleagues and we will continue to develop the Metro Bank offer to provide the digital and physical banking services our customers expect."

At 0902 BST, shares in Metro Bank were up 26.44% at 57.22p.

Reporting by Josh White for Sharecast.com.