According to ICRA, the ratings downgrade factors in the moratorium placed on the bank by the government.
Rating agencies ICRA and Moody’s Investor Service on Friday downgraded various instruments of Yes Bank after the fourth-largest private sector lender was placed under 30-day moratorium by the Reserve Bank of India (RBI).
ICRA downgraded debt instruments worth Rs 52,611.70 crore to (ICRA) D. According to the rating agency, the instruments with ‘D’ rating are in default or are expected to be in default soon. Moody’s downgraded Yes Bank’s long-term foreign currency issuer rating to ‘Caa3’ from ‘B2’ and the ratings remain under review, with the direction being uncertain.
According to ICRA, the ratings downgrade factors in the moratorium placed on the bank by the government, whereby the bank’s payments to its depositors and creditors are now restricted.
Yes Bank additionally has not paid the coupon on the Basel II Tier-I bond, which was due on March 5, and subject to the bank meeting the regulatory capital adequacy ratio (CAR). “In ICRA’s view, restricted payments during the moratorium period severely constrain the ability of the bank to service its liabilities in a timely manner. The terms of proposed reconstitution or amalgamation of the bank will remain the key determinant of the future rating actions on the above instruments,” said ICRA in its statement. The downgrade instruments include infrastructure bond programme, certificates of deposit programme and various bonds of Yes Bank.
Moody’s not only downgraded the long-term foreign issuer ratings, but also bank’s long-term foreign and local currency bank deposit ratings to ‘Caa1’ from ‘B2’, and its foreign currency senior unsecured MTN program rating to ‘(P)Caa3’ from ‘(P)B2’. At the same time, Moody’s has downgraded Yes Bank’s Baseline Credit Assessment (BCA) and adjusted BCA to ‘ca’ from ‘caa2’. “The downgrade of Yes Bank’s issuer and senior unsecured MTN programme ratings to ‘Caa3’ from ‘B2’ and ‘(P)Caa3’ from ‘(P)B2’, respectively, is a result of an event of default triggered by the RBI’s 30-day moratorium, which prevents Yes Bank from making a full and timely payment to its senior creditors,” said Moody’s.