Legal Win To Save Lloyd Banking a Ton

Lloyds Banking Group LYG just won a major court battle, leaving bondholders disheartened as the court agreed that Lloyd could buy back a bundle of bonds at their original issue price.

Bondholders get lower payouts and will lose out on future returns. The bonds had been attractive back when they had yields up to 16 percent, but when times got tough during the recession, Lloyds converted them from permanent interest bearing bonds to ECN bonds.

This conversion terms made it possible for Lloyds to announce, after a stress test did not count the bonds as part of Lloyds’ capital reserves, that a capital disqualification had occurred and they were able to purchase the bonds back at face value.

Lloyds will save approximately $1 billion in interest payments. Shares of the bank closed down about a half percent at $3.59 in Thursday’s trading.