Lloyds loses high-yield bond court case

Lloyds Bank has lost a court case in which it wanted to buy back high-yielding bonds from owners in order to reduce its debt repayments.

The bank went to court in an attempt to buy back the enhanced capital notes that were sold to retail investors around the time of the financial crisis. The bonds pay out between 6 and 16 per cent and will cost the firm around £200m over the next five years.

The notes were sold when the bank was bailed out by the government after the crisis and were intended to be used as a capital buffer. However, the government deemed them not usable as a buffer, which the bank argued was a disqualification event for the notes.

Lloyds says it will appeal the decision. “The group is disappointed with the decision and has sought permission to appeal to the Court of Appeal,” it said in a market statement.

Originally £8bn of bonds were issued, with £5bn of those held by businesses in the City being redeemed last year. Lloyds wanted to redeem another £700m.

The government this week announced it was selling more Lloyds shares, with a share sale to the retail market in the next 12 months. The government had previously been drip-feeding the shares to the market, selling them for an average price of more than 80p.