British bank Lloyds has lost a court ruling, preventing it from redeeming as much as £3.3 billion of contingent capital bonds.

Lloyds, which had to be rescued by taxpayers in 2009, argued that the terms of the bonds allowed for the so-called enhanced capital notes to be redeemed at face value since they no longer qualified as regulatory capital.

The lender's plan to repay the securities before maturity was opposed by Bank of New York Mellon. on behalf of investors, who will now continue to receive interest payments averaging about 10 per cent a year.

Lloyds was given permission to appeal, Judge Terence Etherton said in a London court on Wednesday. While the notes were disallowed as capital in last year's round of stress testing, they may be counted in future tests, Lloyds said in a statement summarising the judgment.

That meant the disqualification hadn’t occurred, and the company doesn’t have the right to redeem them, according to the statement.

“This isn’t really a yes or no answer,” said Roger Francis, an analyst at Mizhuo International in London. “Basically, the situation is still unresolved so it’s on to round two.”

- Bloomberg