Metro Bank, a prominent UK challenger bank, has secured a substantial £925 million financing deal following an accounting error in 2019. The deal, confirmed on Monday, includes a £325 million capital raise and £600 million debt refinancing. Jaime Gilinski Bacal, the largest shareholder of the bank, will take majority control after contributing £102 million via his Spaldy investment vehicle. CEO Dan Frumkin is also investing up to £2 million in the equity raise.
The bank's largest shareholder and renowned banking asset transformer, Jaime Gilinski Bacal, will now hold a 53% controlling stake in the bank through his British Virgin Islands-based firm, Spaldy Investments. Major shareholders provided £150 million of fresh equity as part of the deal, while bondholders provided £175 million of new debt.
The financing package comes after Metro Bank misclassified £900 million worth of loans, which led to fines from UK regulatory bodies and disapproval of its mortgage business plans by regulators. Amid financial stability concerns, the Prudential (LON:PRU) Regulation Authority urged Metro Bank to strengthen its balance sheet or find a buyer. The Bank of England was also gauging interest for a potential sale.
In response to these challenges, Metro Bank is planning to sell up to £3 billion in residential mortgages to improve its common equity tier 1 ratio after regulators rejected a change to capital requirements on its mortgage book. This move is described by CEO Dan Frumkin as a 'new chapter' for the bank and awaits a control assessment by the Prudential Regulation Authority (PRA) and approval from the Financial Conduct Authority.
Potential bids for some of Metro's assets from NatWest (LON:NWG), Santander (BME:SAN), and Lloyds Banking Group (LON:LLOY) are under consideration. The stock will be issued at 30p per share, pending regulatory approvals from the PRA and FCA, a discount to its current valuation of 45p per share.
Despite being the first new high street bank in the U.K. in over 100 years with 76 branches, 2.8 million customers, and £21.7 billion (GBP1 = USD1.2181) in assets, the bank's shares had decreased by 47% over the past month. This financing deal provides Metro Bank with an opportunity for "continued profitable growth," according to CEO Daniel Frumkin.
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