Lloyds bondholders lose final battle in Supreme Court

LloydsLloyds bondholders have lost their final appeal to overturn the bank’s forced repurchase of their bonds at face value.

The Supreme Court ruled this morning that Lloyds could buy back the bonds at par with investors not receiving income at interest rates of up to 16 per cent, the Telegraph reports.

The bonds were the subject of a court battle last year, after Lloyds said it would redeem them at face value, which investors contested was against the product terms.

Lloyds won the case in December last year, although investors were thought to be seeking the right to appeal.

The enhanced capital notes were sold to retail investors around the time of the financial crisis. They pay out between 6 and 16 per cent and would have cost the firm around £200m over the next five years.

Lord Neuberger, who announced the judgement, said: “I would dismiss the trustee’s appeal, on the basis that I consider that a capital disqualification event has arisen.”

The dissenting judges Lord Sumption and Lord Clarke said: “These were long-dated securities, which cannot have been intended to be redeemed early except in some extreme event undermining their intended function and requiring their replacement with some other form of capital.”

Lloyds Banking group says: “The Supreme Court has today handed down its decision in respect of the interpretation of certain terms of the enhanced capital notes and found in the group’s favour.

“The Court held that a capital disqualification event, as defined in the conditions of the ECNs, has occurred.

“Throughout the process the group has sought to balance the interests of all stakeholders and the group welcomes this decision from the Supreme Court.”