Shares in troubled lender Metro Bank (MTRO.L) surged 30% on Wednesday as the bank looked set to raise £350m.
Metro Bank announced on Wednesday afternoon that it had launched a bond issue, seeking £300m at an interest rate of 9.5%. The bank said book runners were over subscribed and said in a subsequent update said it was upgrading its issue to £350m.
“Metro Bank appreciates the strong support shown by investors in today's transaction, resulting in an order book in excess of £550m from more than 55 accounts,” the company said. “Allocations and pricing will follow later today.”
The successful bond issue eases concerns around Metro’s regulatory capital and shares surged on the news. Metro Bank shares were 32.8% higher by 1.20pm UK time.
Metro Bank has been struggling with an accounting scandal that has seen its share price plummet and sparked fears that the startup lender could collapse.
Metro admitted in January that it had misclassified £900m-worth of loans and was short on regulatory capital needed to back up the loans as a result. The bank was forced to raise £375m from shareholders to shore up its accounts but has recently been seeking additional debt funding.
Last month the lender was forced to abandon a planned £200m bond issue due to a lack of investor interest. This was despite the high interest rate of 7.5% on offer. Earlier this week, credit rating agency Fitch downgraded Metro Bank deeper into “junk” investment territory.
Despite Wednesday’s share price surge, Metro’s stock remains almost 90% below its peak in January prior to the announcement of the accounting error.
News of the successful bond issue comes on the same day that Metro Bank announced its founder and chairman Vernon Hill II was stepping down from the board at the end of December. Colourful American Hill founded Metro in 2010 but has been a divisive figure in the City of London. He was criticised for paying his wife £21m since 2010 for design services at Metro Bank branches, and for paying for private jets on company expenses.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.