Lloyds bond battle ends badly for investors

Lloyds Bank's decision to redeem £3bn-worth of bonds has been slammed by investors as unfair and premature. Sarah Moore reports.

Lloyds Bank has announced that it will redeem £3bn-worth of bonds known as enhanced capital notes (ECNs) on 9 February. The decision comes after more than a year of legal battles with the bondholders, who argue that Lloyds does not have the right to redeem the bonds. Given that the investors might still be able to take their case to the Supreme Court, Lloyds' action has been criticised as premature. The bank says it will compensate bondholders if the court ultimately rules against it.

The affected investors, including many pensioners who rely on the bonds for income, are those who bought bonds called permanent interest-bearing shares (Pibs). These had been issued by building societies that were subsequently taken over by Lloyds. During the financial crisis, Lloyds needed to raise fresh capital and asked holders of Pibs to swap them for a different type of bond the ECN.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Sarah is MoneyWeek's investment editor. She graduated from the University of Southampton with a BA in English and History, before going on to complete a graduate diploma in law at the College of Law in Guildford. She joined MoneyWeek in 2014 and writes on funds, personal finance, pensions and property.