Allen & Overy (A&O) and South Square Chambers have won a High Court case for investors who own high-yield bonds worth £3.3bn in Lloyds Banking Group, who claimed that they were entitled to enhanced capital notes (ECN) in advance of their respective maturity dates.
Norton Rose Fulbright partner Paul Morris instructed 4 Stone Buildings’ Robert Miles QC and Gregory Denton-Cox to act for Lloyds Banking Group.
The ECNs were issued in 2009 as part of a £8.3bn capital raising issuance to keep the bank afloat. Lloyds has since bought back £5bn of ECNs in exchange for other instruments.
Approximately £3.3bn worth of ECNs are outstanding and Lloyds had wanted to redeem £700m of them at face value rather than pay a premium.
Lloyds argued that the terms of the ECN allowed them to be redeemed by the issuer before their maturity dates – between 2019 and 2029 – if a capital disqualification event (CDE) had occurred.
However the Chancellor of the High Court, Sir Terence Etherton, ruling yesterday (3 June) in favour of BNY Mellon, disagreed. Etherton said in his judgment that there had to be a declaration that a CDE has not occurred.
A&O is a regular adviser to BNY Mellon, and earlier this year represented the bank on a Financial Conduct Authority investigation that saw it slapped with a £126m fine for breaching custody rules (15 April 2015).
The legal lineup:
For the claimant, BNY Mellon Corporate Trustee Services
South Square’s Jeremy Goldring QC and Stephen Robins, instructed by Allen & Overy partner Jonathan Hitchin
For the defendants, (1) Lloyds Banking Group Capital No.1 and (2) Lloyds Banking Group Capital No.2
4 Stone Buildings’ Robert Miles QC and Gregory Denton-Cox, instructed by Norton Rose Fulbright partner Paul Morris