Yes Bank CEO Prashant Kumar on Saturday said that the bank will challenge the high court’s decision while adding that there is no compulsion on the bank to pay interest on or redeem its AT- 1 bonds. He said this while speaking with analysts on Saturday soon after the announcing quarterly results.
Kumar said that “in the worst cases scenario the common equity tier one capital of the bank would come down. However, the capital adequacy would be maintained as the AT-1 capital increases.” This would happen if the bonds’ write-off stands cancelled as ordered by the court, said an analyst.
There is another solution. Bondholders have sought to be compensated with shares of Yes Bank instead of the AT-1 bonds which will ensure that the bank’s equity capital is not eroded, the people said. Bank analysts said that this could dilute the shareholding.
Yes Bank shares fell almost 7.5% today to trade at around Rs 18.30 at 1.15pm.
In a petition to the court soon after the RBI imposed moratorium, AT-1 bondholders had filed a writ petition saying that they were willing to take a 80% haircut and accept equity in exchange of bonds.
Soon after RBI realized that Yes Bank may be on the verge of collapsing, it imposed a moratorium on March 5 and a final scheme on reconstruction of the bank was issued on March 13.Next day, the administrator informed the stock exchanges that AT-1 bonds were extinguished – implying that bondholders will not receive a penny. The decision disheartened pensioners and retail investors, many of them were victims of mis-selling by senior Yes Bank executives. Nippon Mutual Fund, Franklin Templeton India, Barclays and Kotak Mutual Fund and 63 Moons are some of the large AT-1 bondholders, according to media reports.
The division bench said that in its order it has dwelled on whether administrator adhered to the process involved in the write-down of the bonds. It ruled that final scheme dated March 13 2020 deleted the provision for writing down the AT-1 bonds as appearing in the draft scheme. “The question would be whether the Administrator would be competent to write off the AT-1 bonds on March 14, 2020 – the day after the final Yes Bank Reconstruction Scheme 2020 was notified on March 13, 2020,” the order said.
Marquee investors like
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