L&T moving court today against RBI plan to write down bonds

L&T moving court today against RBI plan to write down bonds thumbnail
Mumbai: Larsen & Toubro may break ranks with other investors holding Yes Bank’s Additional Tier 1 (AT 1) bonds and move the Bombay High Court on Thursday (March 12) against the Reserve Bank of India (RBI) proposal to write their value down to zero as part of a rescue plan for the lender. On the…

Mumbai: Larsen & Toubro may break ranks with other investors holding Yes Bank’s Additional Tier 1 (AT 1) bonds and move the Bombay High Court on Thursday (March 12) against the Reserve Bank of India (RBI) proposal to write their value down to zero as part of a rescue plan for the lender.
On the other hand, other AT 1 holders represented by the Axis Trustee have decided to defer moving court to March 16 after starting negotiations with the RBI to convert a part of the bond exposure into equity, said people aware of the matter. The plan may involve an 80% haircut, which L&T isn’t agreeable to, they said.
Haircut Hindrance
“Axis Trustee has proposed a plan to convert a part of the bond exposure to equity… Back channel negotiations have begun,” said an official involved in the talks. “L&T is not agreeable with the size of the haircut and may decide to seek a separate resolution.”
L&T didn’t respond to queries.
Investors in AT1bonds stand to lose a total Rs 8,500 crore. “The instruments qualifying as additional tier 1 capital, issued by the Yes Bank Ltd under Basel III framework, shall stand written down permanently, in full, with effect from the appointed date,” the RBI had said in its March 6 rescue proposal, which involves State Bank of India (SBI) acquiring a stake of as much as 49% in Yes Bank.
“We decided not to mention the matter in Bombay High Court as we are negotiating with the RBI on converting the bonds into equity,” said a bond holder aware of discussions. “While the plan does not have the go ahead from the RBI we are hopeful at the plan will be approved. This is better than losing our entire money, since SBI is the anchor investor if the bond holders are allotted equity shares as per the current share price a lot of our money will be recovered.”
The talks involve converting a part of the Rs 8,800 crore bonds into equity. Against a Rs 100 investment, Rs 20 will be converted into equity and the remaining will be written off. Yes Bank shares will be allotted to the bond holders at Rs 10, said people aware of the details.
ET reported March 11 that the AT1 bondholders had proposed that the debt be converted into Rs 1,700 crore of equity. Existing stockholders of Yes Bank will end up with one share for every three they own, it said. Investors expect to benefit since the Yes Bank stock is trading upwards of Rs 28.
Mutual fund companies such as Nippon, Kotak and Franklin, pension funds, insurance firms and the likes of Reliance Industries and Barclays Bank stand to lose investments in AT1 bonds.
Nippon MF has about Rs 2,500 crore in AT1 bonds, followed by Franklin MF (Rs 590 crore), Barclays Bank (Rs 246 crore), Kotak MF (Rs 130 crore) and Reliance Industries (Rs 100 crore), according to sources.
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