British lender Metro Bank has rejected takeover bids from specialist business lender Shawbrook. Instead, Metro Bank is now engaged in discussions with bondholders regarding a potential equity infusion and a debt restructuring plan.
Subsequently, Reuters disclosed that Metro Bank had entered discussions with its bondholders to explore the possibility of an equity injection by existing investors. This strategic move would be executed alongside a comprehensive debt restructuring initiative. The proposal seeks to extend the maturity of Metro Bank’s outstanding senior debt while converting the subordinated debt into equity.
Sky News indicates that the discussions with bondholders aim to finalize a refinancing package worth more than £500 million ($611.90 million). Bloomberg later revealed that Metro Bank intends to convert £250 million of its tier 2 notes into equity and extend the maturity of £350 million in senior bonds, due in 2025.
Metro Bank Discusses Funding Options
Recent volatility in Metro Bank’s stock prices has prompted the institution to initiate discussions with its shareholders regarding funding options over the weekend. This announcement, however, triggered another selloff in the bank’s shares, and its senior bonds maturing in October 2025 fell to a record low.
Metro Bank’s journey to secure regulatory approval for the advanced internal rating-based method (AIRB) for assessing risk on mortgage loans began in 2016. This approach was not only aimed at expanding the residential mortgage business but also at bolstering capital ratios by reducing risk-weighted assets associated with mortgages.
Throughout these challenges, Metro Bank’s executives maintained an ongoing dialogue with the Prudential Regulation Authority (PRA) regarding using the AIRB approach. As recently as August, they expressed optimism about regulatory responsiveness. However, a subsequent communication from the PRA indicated that further work was needed, prompting the bank to explore capital-boosting strategies.
Headquartered in London, Shawbrook specializes in serving real estate professionals, Small and Medium-sized Enterprises, and consumers. The lender boasts a substantial loan book of £10.5 billion, as per its website.
