Lloyds: Court Finds No Capital Disqualification Event In Connection With ECNs

(RTTNews) - Lloyds Banking Group PLC (LLOY.L, LYG) reported that the Chancery Division of the High Court has handed down its judgment on the interpretation of certain terms of the Enhanced Capital Notes (ECNs), and found that a Capital Disqualification Event (CDE) in connection with the ECNs has not occurred.

The Judge concluded that despite the fact that the ECNs were not taken into account for the most recent stress test applied by the PRA, the ECNs may still be taken into account for future stress tests and therefore a CDE had not yet occurred. The Group is disappointed with the decision and has sought permission to appeal to the Court of Appeal.

The Group noted that, in the event that it is unsuccessful in the appeal the opportunity to refinance these high coupon securities, with an associated benefit of approximately 200 million pounds per annum for the next five years, would be foregone. Regardless of the outcome of the appeal, the Group remains confident that its Net Interest Margin for 2015 will exceed approximately 2.55%, in line with current guidance. In the longer term the Group also continues to expect its Return on Required Equity to be 13.5%-15.0% by the end of 2017.