Metro Bank board to meet bondholders over refinancing package

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Metro Bank’s board members are due to meet a group of bondholders who proposed a £600mn capital injection earlier in the week, in the hope of securing a refinancing package for the UK lender over the weekend.

The meeting with the consortium is expected to take place later on Saturday, according to a person familiar with the situation, and comes as the challenger bank works to shore up its balance sheet.

The group, represented by investment banking boutique PJT Partners, contacted the lender’s board on Monday with the offer of a £600mn injection, but the company had not accepted as of Friday, the Financial Times previously reported. The proposal came before the bank approached investors about a separate fundraising plan to raise a similar amount.

Metro has already rejected a bid from Shawbrook, the specialist lender, to take over the bank, according to a person close to the discussions. Financial regulators are keeping a close eye on developments at Metro after a challenging week in which its shares have ricocheted.

The lender, backed by BC Partners and Pollen Street Capital approached Metro a number of times over the past 12 months, according to a source close to the process. Robert Sharpe, Metro’s chair, is also the chair of Pollen Street.

Metro Bank, Pollen Street, Shawbrook, BC Partners, the Financial Conduct Authority and Prudential Regulation Authority all declined to comment.

Sky News first reported Saturday’s expected meeting between Metro’s board and the bondholder group, and the prior approach by Shawbrook.

Metro, which was launched in 2010 with the aim of disrupting the retail banking market, is looking to raise hundreds of millions of pounds after regulators last month failed to approve a request from Metro to lower the capital requirements attached to its mortgage business.

It also has to refinance £350mn of debt by October 2024, when the bond can no longer count towards the capital buffer known as MREL, a key regulatory measure. Earlier in the week, Metro said it was considering a range of options, including a combination of equity and debt issuance, as well as refinancing and asset sales.

It has also sounded out rivals, including high street lenders such as HSBC, Lloyds Banking Group and NatWest, about buying a third of its mortgage book, although analysts are sceptical that this would solve the lender’s problems in the longer term. Its decision to focus on building and maintaining a branch network has been a costly approach and runs contrary to the increasing digitisation of the banking sector.

The prospect that the bank might have to raise new funds caused Metro’s shares to fall 26 per cent on Thursday. The stock recovered some of those losses on Friday, ending up 21 per cent, but remained lower over the week.

Additional reporting by Laura Noonan, Ivan Levingston and Akila Quinio in London