LONDON (Reuters) - Troubled British lender Metro Bank (MTRO.L) ditched a 250 million pound ($311 million) bond issue on Monday after failing to attract investors despite offering a hefty yield.
Metro, which launched on British high streets in 2010, has endured a torrid year after disclosing a major loan book error in January that wiped more than 1.5 billion pounds off its stock value.
The bank has struggled to rebuild investor confidence since, while investor concerns about the economic impact of a potential disorderly Brexit have also weighed on its share price.
The British challenger bank had launched the deal on Monday morning, looking to raise a minimum of 250 million pounds of bail-in debt known as “MREL” to meet an interim regulatory deadline of Jan. 1 2020.
Even though the bank offered a chunky 7.5% yield on the new four-year bond issue, in November last year the bank was targeting a yield of 2%-4% for MREL debt, orders had only reached 175 million pounds by around 1300 London time (1300 GMT).
The banks managing the transaction had also reduced the size of the deal sought from a minimum of 250 million pounds to 200-250 million pounds.
“Metro Bank PLC thanks the broad number of investors who have met with the company and shown interest in their potential inaugural MREL issuance. Given the current market conditions though Metro have elected to not proceed with a transaction at this time,” the lender said in a statement.
John Cronin, banking analyst at Goodbody, said he believed Metro’s pulled debt raise made it less likely the lender would be able to continue as an independent business in the long term and predicted it would be sold by the end of 2020.
“This is not a good outcome for Metro Bank,” he said. “While I appreciate market conditions are not at their most receptive, this is not good omen in the context of the bank’s ability to meet its interim MREL requirement.”
A Metro Bank spokeswoman said: “This is about leveraging our flexibility given our strong capital position to ensure we get a transaction away at the right time.”
Since Metro Bank’s admission of its loan book error the lender’s shares are down more than 87%, making it the worst performing British bank stock in the FTSE 250.
The mistake – which is subject to ongoing probes by regulators – led some business customers to pull money out of the bank and forced Metro Bank’s founder Vernon Hill to announce plans to step down as chairman.
Metro had previously flagged to investors that it would have to raise MREL in the second half of this year to meet its regulatory requirements.
Reporting by Abhinav Ramnarayan and Iain Withers; Editing by Susan Fenton and David Evans