Linklaters, Herbert Smith Freehills called in for Metro Bank rescue

Deal sees HSF client Spaldy Investments become embattled high street bank’s majority shareholder

Linklaters and Herbert Smith Freehills (HSF) have been called in to help rescue embattled UK high street lender Metro Bank. 

Linklaters has acted for longtime client Metro Bank on the rescue deal with investors, which was announced late on Sunday (8 October) following a weekend of negotiations and consists of a £325m capital raise, including £150m of new equity, and £600m of debt refinancing.

The equity raise will be led by HSF client Spaldy Investments, the vehicle controlled by Colombian billionaire Jaime Gilinski Bacal that is currently Metro Bank’s largest shareholder. Spaldy will contribute £102m and is set to become the bank's controlling shareholder, with its stake rising from 9% to around 53%. 

Linklaters said it had acted as Metro Bank’s sole legal advisor on the matter, with its team led by corporate partner Jonathan Sadler. Capital markets partners Jason Manketo and Carson Welsh also worked on the matter alongside finance partners Richard Bussell and James Warboys.

Meantime HSF’s team was led by financial services regulatory partner Clive Cunningham and Caroline Rae, a partner specialising in cross-border M&A. 

Daniel Frumkin, Metro Bank’s chief executive officer, said the deal marked “a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years”. 

He added that the bank made a statutory profit after tax in Q3 2023 “and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank”. 

The rescue deal followed a turbulent week for Metro Bank, which became the first new high street bank to launch in the UK in more than a century when it was set up in 2010 by American billionaire Vernon Hill. Its shares dropped by a quarter on Thursday (5 October) following reports it was attempting to raise hundreds of millions of pounds to strengthen its capital levels, but rebounded the following day after it emerged it had been sitting on a £600m offer from bondholders. 

The bank, which has more than 70 branches across the UK and 2.7 million customers, also confirmed in a regulatory filing that it was in discussions to sell up to £3bn of residential mortgages to shore up its balance sheet. 

Bacal commented: “I have been an active investor in Metro Bank since 2019. 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. I believe that the package announced [8 October] enables the bank to pursue growth and build on the foundational work undertaken over the past three years.”

Morgan Stanley is acting as lead financial adviser, debt financial adviser and asset sale adviser on the matter. RBC Capital Markets is acting as financial adviser, sponsor and sole bookrunner on the equity raise. Moelis is acting as debt financial adviser. 

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