Yes Bank AT1 Bonds Worth Rs 8,415 Crore To Be Written Off; Will Affect Some Mutual Funds

On Sunday, Yes Bank in a stock exchange filing said that as part of its reconstruction plan, its additional tier (AT-1) bonds worth Rs 8,415 crore of the Rs 8,695 crore issued will be written down. This will affect mutual funds (like Nippon, Kotak and Franklin Templeton), pension funds and other investors (like high net worth individuals) who had invested in them for the higher rates offered on them.

After reporting a record loss of Rs 18,564 crore for the December-ended quarter, Yes Bank said that it is deemed to be "non-viable or approaching non-viability and accordingly the triggers for a write-down of certain Basel III AT-1 bonds have been triggered".

It added that the considering the provisions of the Basel III circular, AT-1 bonds worth Rs 3,000 crore issued on December 23, 2016, and another lot of Rs 5,415 crore issued on October 18, 2017, stands extinguished.

It also said that the Rs 8,695 crore of the bonds can be used to enhance equity of the bank but it is unclear if the difference of Rs 280 crore not written off, will be converted in equity.

According to an Economic Times report last week, Yes Bank AT1 bondholders had decided to postpone their hearing in the Bombay High Court on the matter after the Reserve Bank of India (RBI) was willing to negotiate with them to convert part of the bonds into equity.

The report citing sources said that Axis Trustee is in the process of submitting the final proposal to RBI that involves an 80 percent haircut for the bondholders which means that of the Rs 100 investment in bonds, Rs 20 will be converted to equity.