Metro Bank

[hiriskpaul]

Found details for fractional holdings on page 34:

Existing Tier 2 Notes Refinancing: a written resolution has been passed by the holders of Metro Bank’s £250,000,000 Fixed Rate Reset Callable Subordinated Notes due 2028 (ISIN: XS1844097987) (the “Existing Tier 2 Notes”) to amend the trust deed constituting the Existing Tier 2 Notes in order to modify, subject to satisfaction of certain conditions (as more fully described below), the terms and conditions of the Existing Tier 2 Notes such that redemption of the Existing Tier 2 Notes will be effected on the Settlement Date by way of delivery, to, or to the account of, the holders thereof, of (i) £600 in principal amount of New 2034 Tier 2 Notes to be issued by the Company for each £1,000 in principal amount of Existing Tier 2 Notes held by each holder and (ii) the Accrued Interest Amount in cash (save that if a holder fails to deliver the required output instruction and/or would be eligible to receive an aggregate principal amount of New 2034 Tier 2 Notes of less than £100,000 or that is not an integral multiple of £1,000, the entitlement or fractional entitlement, as the case may be, to the New 2034 Tier 2 Notes will be delivered instead to a holding period trustee to hold, or, in some circumstances dispose of, such New 2034 Tier 2 Notes on behalf of the relevant holder). This effective exchange will result in an increase to the Group’s CET1 capital of £100 million (the “New Tier 2 Notes Issuance”);

As clear as mud to me what, in practical terms, "New 2034 Tier 2 Notes will be delivered instead to a holding period trustee to hold, or, in some circumstances dispose of, such New 2034 Tier 2 Notes on behalf of the relevant holder" means. Anyone know?

[88V8]

Prospectus is out, all very much as expected.
There is a section saying the bonds must not be offered to scumbag retail investors.

As you say, nothing in the RNS about cash alternative but clearly there must be one.
I'm trying to register at Kroll, where their **&! website doesn't seem to recognise landlines, so haven't read the bumph yet.
Corp Action next week with a tight deadline.

Still a temptation to buy another clip. If it goes through at 60% there's money on the table. However, there must be a cutoff date... maybe already passed....

V8

[88V8]

As clear as mud to me what, in practical terms, "New 2034 Tier 2 Notes will be delivered instead to a holding period trustee to hold, or, in some circumstances dispose of, such New 2034 Tier 2 Notes on behalf of the relevant holder" means. Anyone know?

Mmm, someone... the trustee... will have to monetise the sub-100k entitlements and distribute them.
I guess.

Where's the Plain English Society when you need it...

V8

[88V8]

Page 5
The Holding Period Trustee [Kroll] shall, as soon as reasonably practicable after the Settlement Date, use reasonable endeavours, including (if deemed by the Holding Period Trustee to be necessary or desirable) through the appointment of a reputable institution with relevant experience as a selling agent (a “Selling Agent”), to sell all Submitting Noteholders’ entitlements or fractional entitlements, as the case may be, to New Tier 2 Notes on the open market for such consideration as the Holding Period Trustee (or the Selling Agent) is reasonably able to obtain on the open market, and the Holding Period Trustee shall, as soon as reasonably practicable thereafter, subject to applicable law and/or regulation, transfer the relevant sale proceeds (after deducting any taxes, withholding, fees, costs, or any other expenses properly incurred by the Holding Period Trustee in connection therewith) to each such relevant Noteholder via the relevant Clearing System, all on the terms set out in the Holding Period Trust Deed.

So it is not guaranteed that one will receive 60% for partials.

I am still reading, to see if there is an eligibility cutoff date.

V8

[BondSquared]

I don't see the investment case here - first you buy on the offer side, then the fractional element/portion (if any, depending on your investment size) gets sold on the bid side by an agent in the open market, so for that part you're crossing full market bid/offer, and if the agent has size to do then the bid will come in even lower/even wider bid-offer.
Would obviously be different if Metro had stepped in and paid out fractionals at par, but that would eat away from the capital raised by the haircut, and it has (somewhat wisely) decided to make the process of monetising the fractionals p&l/capital neutral for Metro by using the open market rather than the Metro balance sheet for it.

[88V8]

I don't see the investment case here - first you buy on the offer side, then the fractional element/portion (if any, depending on your investment size) gets sold on the bid side by an agent in the open market, so for that part you're crossing full market bid/offer, and if the agent has size to do then the bid will come in even lower/even wider bid-offer.

Yes, unless they open much above par.
A gamble, really.

V8

[BondSquared]

I don't see the investment case here - first you buy on the offer side, then the fractional element/portion (if any, depending on your investment size) gets sold on the bid side by an agent in the open market, so for that part you're crossing full market bid/offer, and if the agent has size to do then the bid will come in even lower/even wider bid-offer.

Yes, unless they open much above par.
A gamble, really.

V8

Current market pricing implies an opening price of ~77.5 for the new T2. Having said that, if the market starts becoming more confident with the "rescue" then there's nothing to stop that going to and above par. Big if.

[88V8]

Yes, unless they open much above par.
A gamble, really.

Current market pricing implies an opening price of ~77.5 for the new T2.

Caramba... 77%. Even International Personal Finance is better rated....

So typical retail with one clip will get nothing like the headline 60%. Not that the FCA would be interested in what should be illegal inequality, given that we proles aren't supposed to hold this stuff.
I see that the 75% voting requirement explicitly excluded retail.
Huh.

V8

[88V8]

Current market pricing implies an opening price of ~77.5 for the new T2.

I see that the 75% voting requirement explicitly excluded retail.

And sure enough there was no corporate action, not even in the ords which surprised me.

When the dilution has become active it may be worth topping up the ords. Might make a few bob.

Not really tempted by the new T2, especially now we know their attitude to retail.

V8

[BondSquared]

I see that the 75% voting requirement explicitly excluded retail.

And sure enough there was no corporate action, not even in the ords which surprised me.

When the dilution has become active it may be worth topping up the ords. Might make a few bob.

Not really tempted by the new T2, especially now we know their attitude to retail.

V8

fyi the new T2 is 78 bid in the broker market, in line with the pricing implied by the old T2.

[88V8]

And sure enough there was no corporate action, not even in the ords which surprised me.
Not really tempted by the new T2, especially now we know their attitude to retail.

fyi the new T2 is 78 bid in the broker market, in line with the pricing implied by the old T2.

So that implies the cash settlement will be c78% x 60%?

I see there is a corp action now anent the mandatory redemption, which says holders will receive an amount to be determined by the company on an unknown pay date.
Uninspiring, eh?

V8

[BondSquared]

fyi the new T2 is 78 bid in the broker market, in line with the pricing implied by the old T2.

So that implies the cash settlement will be c78% x 60%?

yes, roughly - depends on the aggregate size of fractionals they have to sell (the above quote is for £1mm and indicative grey market pricing, not firm), market timing etc. Also not sure how/if accrued interest on the old T2 will somehow be baked in (not necessarily peanuts - accrued is ~4pts, compared to the current market price of the old T2 of ~47, so ~8.5% of clean market value; or another way of looking at it, the outstanding old T2 accrued is equivalent to ~6.67pts accrued on the new T2).

The ords are within touching distance of their all-time low prior to the rescue weekend, sub-40p.

[formoverfunction]

https://www.fitchratings.com/research/b ... 28-11-2023

Rating Action Commentary
Fitch Affirms Metro Bank Holdings at 'B'; Removes Rating Watch Evolving; Outlook Positive

[88V8]

Dated 1 December, received the coupon for the 5.5s, but not yet the capital. Whatever that might be.

V8

[hiriskpaul]

Dated 1 December, received the coupon for the 5.5s, but not yet the capital. Whatever that might be.

V8

Received payments today at HL, settlement date 30 November! Equivalent to 3.92% of par (par before haircut). I have not worked it out yet, but I am guessing this is accrued interest on the old T2. Back of envelope calculation says that's about 5.1 months interest, which seems about right.

[BondSquared]

Metro ords share price now at an all-time low of 36.65. Give it ~a year until the next rescue / endgame.

[88V8]

Received capital for the redeemed 5.5s at ii today. One clip, £46,580.
So that's a loss of errrm and as it's QCB, not offsetable.

Can't say this has been a very remunerative investment, but heyho.

V8

[hiriskpaul]

Received capital for the redeemed 5.5s at ii today. One clip, £46,580.
So that's a loss of errrm and as it's QCB, not offsetable.

Can't say this has been a very remunerative investment, but heyho.

V8

I have received nothing other than the accrued, but I think that is because my bonds have been exchanged. Hopefully they will turn up at some point.

Edit: Agree, not one of my better investments either, but I have had worse.

[NeilOne]

I have not received anything in HL yet , still have the old bonds. I am expecting cash as only have the minimum holding.

[hiriskpaul]

I am expecting the bonds. I asked HL and they said a few days ago that it could take another 2-3 weeks. I am surprised you have not had the cash yet.