Metro Bank secures £325M capital raise
Metro Bank Holdings PLC announces that it has secured a £325 million capital raise and £600 million debt refinancing package.
The capital package is provided primarily by existing shareholders and noteholders, and new investors.
The Transaction will increase the Bank’s CET1 capital by approximately £200 million, resulting in a pro forma CET1 ratio as of 30 June 2023 in excess of 13%, and extends the maturity profile of the Company’s debt securities to April 2029 (for the new MREL Senior Instrument) and April 2034 (for the new Tier 2 instrument). The pro forma MREL ratio would have been at least 21.5% as at 30 June 2023 and remains above Metro Bank’s minimum regulatory capital requirements (including the CRD IV Combined Buffer).
As part of the Transaction, a number of existing shareholders have given commitments to provide £150m of new equity, and a number of existing noteholders have committed to subscribe for £175m at par value in a new MREL senior instrument maturing April 2029 (call date April 2028) to be issued by Metro Bank Holdings PLC.
The liability management exercise via consent solicitation has secured 100% support from noteholders identified and is expected to reach 75% voting thresholds required for 100% noteholder participation involving the £250m fixed rate reset callable subordinated notes due June 2028 issued by Metro Bank plc (the “Tier 2 Instrument”) and the £350m fixed rate senior notes due October 2025 issued by the Company.
The Debt Refinancing involves:
- a 40% haircut on the notional amount of the Tier 2 Instrument, rising to 45% if 75% (by value) of noteholders of the Tier 2 Instrument do not enter into lock-up agreements supporting the Debt Refinancing by 13 October 2023, resulting in an increase to Metro Bank’s CET1 capital of up to £100m (assuming the 40% haircut);
- the exchange of the balance of the notional amount of the Tier 2 Instrument on a par for par basis for a new subordinated 10NC5 Tier 2 instrument to be issued by Metro Bank Holdings PLC with a coupon of 14%, a call date of April 2029 and a maturity date of April 2034; and
- the 100% (falling to 95% % if 75% (by value) of noteholders of the MREL Senior Instrument do not enter into lock-up agreements supporting the Debt Refinancing by 13 October 2023) exchange of the existing MREL Senior Instrument on a par for par basis into the New MREL Senior Instrument.
Metro Bank expects the Transaction to complete in Q4 2023.
Separate to the Transaction, the company is in discussions regarding an asset sale of up to £3bn of residential mortgages consistent with the successful similar transaction executed in December 2020. The Asset Sale is expected to be CET1 ratio and MREL ratio accretive, reducing RWAs by c.£1bn (assuming a c.£3bn Asset Sale) and allowing Metro Bank to reinvest proceeds into cash at a higher yield, subject to pricing.
Metro Bank is expected to deliver a RoTE in excess of 9% in 2025 and low double-digit to mid-teens thereafter over the medium term.