AT-1 bonds: Yes Bank to move Supreme Court

Yes Bank on Saturday said it will move the Supreme Court against the order of the Bombay High Court setting aside a 2020 order of the administrator to write off the additional tier-I bonds of up to Rs 8,300 crore. “The judgment itself is not questioning the regulatory guidelines in terms of writing down. I think there are questions in terms of the process. There are legal opinions which interpret the whole issue in a different way and make a strong ground for making an appeal before the Supreme Court,” Prashant Kumar, MD & CEO of Yes Bank, said in a post-earnings media call.

In addition, Kumar also said that in the case of perpetual bonds, the bank has the discretion on interest payments. “At this stage, we do not want to comment on whether the interest needs to be paid on these bonds. We will wait for the Supreme Court hearing before commenting,” added Kumar.

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The high court has put the implementation of its order on hold for six weeks, giving the lender time to file an appeal before the apex court. The bank does not expect any outflow of funds happening as an effect of implementation of the order, Kumar said.

From an accounting perspective, the common equity tier (CET) would come down but overall tier-I capital will be the same, he added. The bank’s total capital adequacy ratio stood at 18.2% as of December 31, with CET capital at 13% and tier-II capital at 5.1%.

The high court, in its order, said the decision to write off the bonds was not valid as it was taken after the moratorium period of Yes Bank was completed. “It appears that administrator exceeded his powers and authority in writing off AT-1 bonds after the bank was reconstructed on March 13, 2020,” SM Modak, acting chief justice of the Bombay High Court, said in the order.

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The lender had issued the perpetual AT-1 bonds in three tranches in 2013, 2016 and 2017. In March 2020, a moratorium was imposed on the bank, superseding the then board of directors, and Kumar was appointed as an administrator to manage the bank. The administrator had written down two tranches of the AT-1 bonds. The bondholders had filed a petition before the high court challenging the decision of the bank to write down the AT-1 bonds.