Lloyds says that private investors agree to £58.5m bond buyback

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Lloyds Banking Group said private retail investors had agreed to sell bonds worth a nominal £58.5m, which were issued to rescue the bank during the financial crisis.

Lloyds, 25 percent-owned by the government, issued the bonds, which were designed to boost the bank’s capital if it ran into trouble, in 2009. But new UK and European capital rules in force this year mean the bonds may no longer count as capital.

Lloyds said earlier in April that institutional investors had agreed to exchange £5bn worth of the instruments, known as enhanced capital notes, for new bonds.

The bank surprised investors in February when it said it could buy back the ECNs at face value because new European rules mean they are now unlikely to count towards its capital buffers.

However, analysts did not expect it to offer the bare minimum as upsetting bondholders including hedge funds and other big investors could prove damaging for future fundraisings.

The bank’s treatment of retail investors had been criticised by Mark Taber, who led successful campaigns for retail bondholders in Bank of Ireland and the Co-operative Bank. Taber had said that if Lloyds believed there was an issue with the capital status of the ECNs it should have engaged with all shareholders, including private investors, to find a solution.