personal finance

Yes Bank AT1 holders postpone case after negotiations begin with RBI


YES Bank’s AT1 bond holders have decided to postpone the matter due for hearing in the Bombay High Court today after the Reserve Bank of India (RBI) showed willingness to negotiate with them, people in the know said.

Negotiations are on to convert a part of the Rs 8,800 crore bonds into equity and Axis Trustee is in the process of submitting a final proposal to the RBI.

The plan involves a 80% haircut for bond holders. As per the proposal, against an investment of Rs 100, Rs 20 will be converted into equity and the remaining will be written-off. Yes Bank shares of equivalent amount will be allotted to the bond holders at Rs 10.

“We decided not to mention the matter in Bombay High Court as we are negotiating with the RBI on converting bonds into equity,” said a bond holder in the know of the discussions. “While the plan does not have the go ahead from the RBI, we are hopeful that it will be approved.”

ET in its edition of March 11 had reported that the bondholders have proposed conversion of Rs 8,500 crore AT1 (or, additional tier 1) bonds into Rs 1,700-crore equity with existing stockholders of Yes Bank roughly ending up holding one share for every three equity shares they have.

Investors feel that since the Yes Bank stock is already trading upwards of Rs 27, the plan will be a huge upside to them.

“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 price, a lot of our money will be recovered,” another bond holder said.

The RBI has come up with the restructuring plan to give a new life to Yes Bank that would entail a minimum equity investment of Rs 2,450 crore by State Bank of India. The plan entails wiping out about Rs 8,700 crore invested by bond holders in AT1 instruments.

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 thousands of crores with the Reserve Bank of India deciding to wipe out their investments in a class of Yes Bank bonds.

If the draft reconstruction scheme for Yes Bank is exercised, Nippon MF will lose Rs 2,500 crore worth of investments in AT1 (additional tier-1) bonds, according to a market estimate. The loss will be Rs 590 crore for Franklin MF, Rs 246 crore for Barclays Bank, Rs 130 crore for Kotak MF and Rs 100 crore for Reliance Industries.

Other institutions which stand to lose money include Reliance Nippon Life Insurance, UTI MF, Larsen & Toubro and Bharti Axa. Pension funds such as the State Bank of India Employees’ Pension Fund, Larsen and Toubro Officers and Supervisory Staff Pension Fund, the NPS Trust Fund, Indian Oil Corp Employees Provident Fund (refineries division) and National Hydroelectric Power Corporation Employees Provident Fund would also get nothing from their investments in these perpetual bonds, if the draft recast plan is finalised.





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