Mercia Asset Management Secures £38 Million in Metro Bank Financing to Drive Growth Strategy

Details of Mercia Asset Management’s Metro Bank Financing Agreement

Mercia Asset Management PLC has secured a three-year financing arrangement with Metro Bank PLC, enhancing its financial capacity to execute strategic growth objectives. The agreement features a £13 million term loan facility alongside a £25 million revolving loan facility, totaling up to £38 million. This structure enables Mercia to balance immediate capital needs with the flexibility to access additional funds throughout the facility term.

Both facilities are priced relative to the Sterling Overnight Index Average (SONIA), reflecting the Bank of England’s preferred benchmark post-LIBOR transition. The term loan carries a fixed margin of 3.99% per annum over SONIA, ensuring predictable capital costs. The revolving loan features a tiered margin starting at SONIA plus 3.50% per annum, with a ratchet mechanism that can reduce the margin to 3.00% depending on Mercia’s net leverage. This incentivizes disciplined leverage management and offers cost savings as leverage decreases. The facilities agreement contains customary banking covenants, including financial undertakings, security interests, and default events typical for such arrangements.

Capital Deployment Aligned with Mercia '27 Strategic Growth Plan

Mercia intends to utilize the Metro Bank facilities to fund ongoing growth initiatives under its multi-year Mercia '27 strategic plan, aimed at expanding the Group’s market presence and asset base. While specific allocations across Mercia’s four asset classes—venture, development capital, property finance, and proprietary capital—are not detailed, the financing is expected to support expansion within its existing operational footprint and investment capabilities.

With 11 regional offices, extensive local adviser networks, and university partnerships across the UK, Mercia is well-positioned to deploy additional capital through established deal flow channels. Its 'Complete Connected Capital' platform allows flexibility in using these funds for direct investments, portfolio company growth, acquisitions, or balance sheet strengthening to support further leverage. The strategic plan emphasizes a disciplined approach to capital deployment, focusing on identified growth opportunities.

Mercia’s Regional Private Capital Management and Market Position

Operating with a distinctive regional focus across the UK, Mercia Asset Management manages over £2.2 billion in assets, supporting SMEs and growth businesses nationwide. This regional emphasis differentiates Mercia from larger national or international asset managers by fostering close local relationships and uncovering investment opportunities often missed by centralized competitors.

Mercia’s infrastructure includes 11 UK offices, extensive adviser networks, and university partnerships that bolster deal sourcing and local credibility. This setup enables Mercia to compete effectively in the underserved regional SME financing sector, where personal relationships and market knowledge are critical. The new bank financing may allow Mercia to deepen regional engagement or expand into adjacent markets while maintaining its relationship-driven investment model.

New Banking Partnership with Metro Bank and Relationship Development

This facilities agreement establishes a new banking relationship between Mercia Asset Management and Metro Bank PLC, described as "proactive and constructive" during negotiations. Metro Bank, the UK’s first new retail and commercial bank in over a century since its 2015 launch, focuses on accessible banking for individuals and SMEs. Its relationship-oriented lending approach aligns with Mercia’s investment philosophy.

Dr Mark Payton, CEO of Mercia Asset Management, highlighted that the facilities "provide further flexibility to support the Group's ongoing growth initiatives" and praised Metro Bank’s collaborative approach. This partnership may position Metro Bank as Mercia’s primary banking provider for future financing needs beyond the current three-year term.

Mercia’s Multi-Asset Class Investment Platform and Financing Flexibility

Mercia’s investment platform spans four asset classes—venture, development capital, property finance, and proprietary capital—collectively branded as 'Complete Connected Capital'. This multi-asset approach offers significant flexibility in deploying the Metro Bank facilities across various investment types, geographies, and time horizons.

The £25 million revolving loan facility supports working capital and concurrent investments, while the £13 million term loan finances longer-term strategic initiatives. The revolving facility’s margin ratchet encourages disciplined leverage management, reducing borrowing costs as leverage declines. Specific allocation of funds among asset classes remains at the board’s discretion, allowing opportunistic capital deployment aligned with evolving strategic priorities.

Financial Covenants and Risk Management in the Facilities Agreement

The agreement includes standard credit protections such as representations on financial condition and compliance, ongoing undertakings, financial covenants including net leverage tests, security interests likely involving company asset charges, and events of default clauses. The net leverage covenant directly impacts the revolving facility’s pricing, aligning Metro Bank’s and Mercia’s interests in prudent balance sheet management.

Details on leverage thresholds or consequences of covenant breaches are not disclosed. Investors should monitor Mercia’s leverage levels throughout the facility term to assess capital deployment effectiveness and covenant compliance. The security provisions grant Metro Bank priority claims on material assets in case of financial distress.

Mercia’s Asset Management Scale and Growth Outlook

Managing over £2.2 billion in assets, Mercia maintains a substantial investment base across its regional and multi-asset class platform. This scale underpins revenue potential through management fees, though fee rates and asset class splits are not disclosed. The new £38 million financing supports Mercia '27 growth initiatives, reflecting confidence in available investment opportunities that can generate returns sufficient to service debt.

Success under Mercia '27 will be measured by AUM growth, investment return maintenance or improvement, and adherence to financial covenants. The Metro Bank partnership could also enhance deal flow through referrals, leveraging the bank’s SME relationships.

Inside Information Disclosure and Regulatory Compliance

The announcement is classified as inside information under Article 7 of the Market Abuse Regulation (EU) 596/2014, as retained in UK law post-Brexit. Inside information refers to non-public details likely to affect the price of listed securities if disclosed. Mercia’s disclosure through the RNS system on 23 July 2026 ensures equal investor access, maintaining market integrity and preventing insider trading advantages.

Company officers and advisers may have been aware of this information prior to public release, consistent with inside information regulations.

Banking Sector Trends and Relationship-Focused Lending

Mercia’s new Metro Bank relationship reflects broader trends in UK commercial banking, where challenger banks and relationship lenders target underserved segments. Metro Bank’s emphasis on customer service, local presence, and relationship lending contrasts with larger institutions’ transactional approaches. For asset managers like Mercia operating in regional SME markets, such partnerships offer responsiveness, flexibility during market stress, and constructive strategic engagement.

This financing deal indicates growing recognition among lenders of the asset management sector’s financing needs and opportunities. Metro Bank’s proactive engagement underscores its strategic intent to develop relationships with scale-appropriate asset managers.