Victory for investors BNY Mellon in High Court bond dispute

Date: 04/06/2015

South Square's Jeremy Goldring QC and Stephen Robins, instructed by Allen & Overy, have won a High Court case for investors BNY Mellon.

BNY Mellon, which is the trustee of high-yield bonds known as enhanced capital notes (ECNs) with a par value of £3.3bn issued by Lloyds Banking Group, argued successfully that Lloyds was not entitled to redeem the ECNs at par in advance of their respective maturity dates.

BNY Mellon became a trustee of the various series of ECNs when they were issued in 2009 as part of a £8.3bn capital raising issuance to keep the bank afloat. Lloyds subsequently bought back £5bn of ECNs in exchange for other instruments, but had wanted to redeem the outstanding ECNs at face value to avoid the obligation to pay high rates of interest until the maturity dates.

Lloyds argued the terms of the ECN permitted them to be redeemed before their maturity dates if a capital disqualification event (CDE) had occurred. However, ruling in favour of BNY Mellon, the Chancellor, Sir Terence Etherton, held that a CDE has not occurred.

Click here to view the full judgment 

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