Overall, more than Rs 8,000 crore of investments are exposed to YES Bank’s AT-1 bonds
Investors in YES Bank’s additional tier-1 (AT-1) bonds have written to Reserve Bank of India (RBI) that will accept the regulator’s offer where they can recover at least 20 per cent of investments and will subsequently withdraw petition from Bombay High Court (HC).
The bondholders, in a letter sent through Axis Trustee Services, proposed that they be allotted a minimum 1,700 million shares in proportion to their current exposures.
As a result, the imputed value will work out to Rs 10 per share, which would approximately amount to Rs 1,700 crore. This will lead to “salvaging near-about 20 per cent of the principal outstanding,” the note said.
Further, the bondholders have requested that the lock-in features, if any should be restricted upto 36 months in-line with the proposed new equity issuance of issuing bank.
The trustee also pointed out that if the above terms are acceptable, the majority bondholders of AT-1 bonds — for which Axis Trustee is acting — shall not purse any further legal recourse and will instruct to withdraw the current petition.
Axis Trustee has filed a petition at Bombay HC on behalf of the bondholders, seeking relief on RBI’s proposal for full writedown of YES Bank’s AT-1 Bonds.
However, legal arguments are yet to begin in the court, with the matter still in pre-admission stage.
Meanwhile, L&T and L&T Officers and Supervisory Staff Provident Fund also moved HC on Wednesday, seeking relief against RBI’s move. Overall, more than Rs 8,000 crore of investments are exposed to YES Bank’s AT-1 bonds.
The information memorandum of these bonds had outlined risk of writedown or equity conversion in case the bank is deemed non-viable or approaching non-viability.
AT-1 bonds are also called as perpetual bonds as there is no fixed maturity date on these bonds and bondholders can exit when the issuing bank exercises its call option, which is typically five years from date of issue.