Yes Bank Given Three Days to Reinstate ₹8,415 Crore AT1 Bonds
Axis Trustee Services has mandated Yes Bank to restore its AT1 bonds following a Supreme Court ruling, impacting the bank's capital ratios.
Axis Trustee Services demands restoration of ₹8,415 crore AT1 bonds within three days.
Supreme Court ruling prevents Yes Bank from writing off the bonds, affecting its capital ratios.
Trustee exploring legal options if Yes Bank delays compliance or defaults on coupon payments.
In a significant development, Axis Trustee Services Ltd has issued a directive to Yes Bank Ltd, requiring the reinstatement of ₹8,415 crore worth of additional tier-1 (AT1) bonds within a three-day timeframe. This demand follows a Supreme Court ruling on October 15, which upheld a Bombay High Court decision that deemed the bank's previous write-off of these bonds in March 2020 unauthorized. The trustee's notice, dated October 28, was communicated to the bank's managing director and board, urging them to restore the bonds to their pre-write-off status.
The Supreme Court's ruling has far-reaching implications for Yes Bank, particularly regarding its capital ratios and obligations to bondholders. The bank's management indicated that reinstating the bonds could lead to a reduction of approximately 240 basis points in its common equity tier-1 (CET1) ratio. As of now, Yes Bank is still evaluating the judgment's implications and has not made a definitive decision regarding the payment or cancellation of unpaid coupons.
In a separate communication, the trustee has sought clarification on three specific coupon payments, including those due for the period from March 14, 2020, to October 15, 2026. The trustee has requested that Yes Bank provide a clear timeline for completing its assessment of the situation, although it has not imposed a specific deadline. Yes Bank's management, however, has expressed reluctance to speculate on implementation details until their assessment is finalized.
The trustee's actions are in response to pressure from the Yes Bank AT1 Bond Holders Association, which represents 389 individual bondholders with a total exposure of around ₹160 crore. The association has also reached out to regulatory bodies, including the RBI and Sebi, seeking written responses regarding the bank's compliance with the Supreme Court ruling. The trustee is currently considering its legal options should Yes Bank fail to comply or default on coupon payments.
Looking ahead, the trustee has scheduled a bondholders' meeting for November 16 to discuss the next steps. As Yes Bank continues to navigate this complex situation, it reported a net profit of ₹1,080 crore for the July-September quarter, reflecting a 65% increase from the previous year. However, the bank clarified that its financial results do not account for any potential impacts from the Supreme Court judgment, as its assessment remains ongoing.
