Hi Paul,
Re the 5.5%s
Call is unlikely so we reset to 4.45% plus the average of UK5yr..Say 7.50 to allow a little more softening..7.75% if not ?
5yrs then left to maturity in 2028.
The PRA removes the 5.5% issue from MREL compliance in June 2025.
From latest results :
• "Tier 2 debt remains eligible for MREL after HoldCo insertion (required by June 2023)" 1.
1. Temporary, time-limited, adjustment agreed by the Bank of England – eligibility until 26 June 2025. Tier 2 has a call date on 26 June 2023 and then resets at the reference rate plus 4.45% margin vs. current coupon of 5.5%."
Pre June 2025, Metro need a capital raise. Could be part rights/part debt
Difficult question to answer, but i have indicated my " best bet " of the two options below.
Do you think current holders will be "rolled over" into a new MREL compliant bond ?
Or tendered for ?
Am hopeful that Metro has decent access to capital mkts in 2 yrs..should be profitable and general rate environment more favourable/less panicky !
And that the tender is chosen option.
I rechecked the duration and risk profile of the Treasury book from last results.
Metro hold a low risk Treasury portfolio, as of March 2023.
Composition looks ok.
https://www.metrobankonline.co.uk/globa ... y-2022.pdf"•
Interest income earned on investment securities rose to £67.6m in 2022 from £23.2m in 2021, representing an effective yield of 1.18% (2021: 0.30%).
• Low risk density (2022 RWA of ~£250m)
• Weighted average portfolio repricing duration
- 1.3 years including cash
- 1.7 years excluding cash "
If we back the tender as the most likely exit, it would surely be a big plus for investor relations, before then we have 2 years of cpns at 7.5%appx and a tender to look fwd to.
Reason for todays post is i went to mkt this week to see if there was any firm bid with a view to reducing the 5.5%.
This issue is held with HL...they do not go fishing in the mkt, i think they leave the order with one mkt maker and I gave up.
I believe they have been marked down to a dealable 60-66 .
Am holding , may add on slippage, but would appreciate any comments,
Swan