Metro Bank shares bounced back in early trading today, after the embattled British bank announced a £325m capital raise and £600m debt refinancing yesterday.
The stock was up 21% to a four-day high in early trade, having lost more than 55% so far in 2023.
The deal would hand majority shareholder control to Colombian billionaire Jaime Gilinski and would entail a hit for bondholders, who would then switch into higher interest-paying bonds.
Metro Bank had sought to shore up its finances after a string of setbacks in recent years, including accounting errors, leadership departures and delayed regulatory approval for key capital reliefs.
The lender - which launched in 2010 to challenge the dominance of Britain's big banks - said the capital raise comprised £150m of new equity and a £175m issuance of bail-in debt known as "MREL".
The equity raise was led by Metro's largest shareholder, Gilinski-owned Spaldy Investments, which contributed £102m.
Spaldy will become the controlling shareholder once the transaction completes, Metro said, with a 53% stake.
"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," Gilinski said in a statement.
The deal also involves a restructuring of its debts that will extend the maturity of its borrowings, with holders of a £250m Metro Bank tier 2 bond due in June 2028 taking a 40% haircut.
Holders of that bond will be swapped into a new bond paying a 14% interest rate, while holders of a separate bail-in MREL bond will switch out to a new one paying a 12% coupon.
The fundraisings are due to complete in the fourth quarter, subject to shareholder and bondholder agreement.
The bank also said it was in discussions regarding the sale of up to £3 billion of residential mortgages.
The Bank of England's Prudential Regulation Authority said in a statement: "The Prudential Regulation Authority welcomes the steps taken by Metro Bank to strengthen its capital position."
Several major banks were approached by the regulator this week to consider making an offer for Metro, including HSBC and Lloyds.
Reuters reported on Friday that Metro Bank was set to discuss funding options with its shareholders over the weekend, after a proposal from bondholders earlier in the week was seen as handing over too much control.
