Judgments

CoCos – Supreme Court decision in litigation between Lloyds and its noteholders

BNY Mellon Corporate Trustee Services Limited v. LBG Capital No 1 Plc and another [2016] UKSC 29

June 2016 saw the publication of the Supreme Court judgment in this case involving Lloyds Banking Group (LBG) and its attempt to redeem contingent convertible securities (CoCos) (please see our previous summary, CoCos - litigation between Lloyds and its shareholders).

In 2009, LBG issued, via two special purpose vehicles, the so-called Enhanced Capital Notes (ECNs) which were CoCos. Although the ECNs had different maturities, they could be redeemed early if a Capital Disqualification Event (CDE) took place. The dispute arose between LBG and holders of the ECNs (represented by the trustee, BNY Mellon) as to whether a CDE had in fact taken place which would entitle LBG to redeem the £3.3 billion of ECNs, which would otherwise have carried a rate of interest over 10% p.a.