Metro Bank in Crisis: Colombian Billionaire Gilinski to Inject Capital and Assume Control
Metro Bank Secures £325 Million Capital Raise and £600 Million Debt Refinancing, Colombian Billionaire Jaime Gilinski to Assume Majority Control
In a bid to bolster its balance sheet following a tumultuous week of trading, the embattled British bank, Metro Bank, has unveiled a £325 million ($396.5 million) capital raise and a £600 million debt refinancing plan. The agreement, which emerged after a weekend of intense negotiations, is set to shift majority shareholder control to Colombian billionaire Jaime Gilinski, the bank's largest investor. Bondholders will incur a hit, transitioning to higher interest-paying bonds as part of the deal.
Metro Bank has been grappling with a series of setbacks in recent years, including accounting errors, leadership departures, and delayed regulatory approval for crucial capital reliefs. The bank, established in 2010 with the mission of challenging the dominance of major British banks, disclosed that the capital raise encompasses £150 million in new equity and a £175 million issuance of bail-in debt referred to as "MREL." The equity infusion was spearheaded by Spaldy Investments, owned by Gilinski, which contributed £102 million.
Upon completion of the transaction, Spaldy will become the controlling shareholder, holding a 53% stake.
Jaime Gilinski expressed his motivation for this move, stating, "The opportunity to become the bank's major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service."
The restructuring of the bank's debts is part of the agreement, extending the maturity of its borrowings. Holders of a £250 million Metro Bank tier 2 bond set to mature in June 2028 will take a 40% reduction. They will be converted into a new bond offering a 14% interest rate. Similarly, holders of a separate bail-in MREL bond will be transitioned to a new bond offering a 12% coupon.
The capital-raising efforts are scheduled to conclude in the fourth quarter, pending approval from shareholders and bondholders. Additionally, Metro Bank is engaged in discussions regarding the potential sale of up to £3 billion worth of residential mortgages.
The Prudential Regulation Authority of the Bank of England has welcomed Metro Bank's initiatives to bolster its capital position. Notably, several major banks, including HSBC and Lloyds, were approached by regulators this week to explore the possibility of making offers for Metro Bank. This followed an earlier proposal from bondholders, which was perceived as ceding too much control to them and prompted further discussions on funding options.