fund

Yes Bank promoters prepay Rs 400 crore to two mutual fund houses


Shares of YES Bank fell about 4%, recovering from their morning lows, on reports that the promoters made a partial pre-payment on ₹400 crore of non-convertible debentures held by Reliance Mutual Fund and Franklin Templeton Mutual Fund. ET couldn’t independently ascertain the veracity of these reports.

Reliance Mutual Fund is said to be negotiating over the repayment of ₹400 crore against NCDs issued by Morgan Credits (MCPL), YES Bank’s co-founder Rana Kapoor’s holding company.

However, the money is yet to be credited into the Reliance Mutual Fund account, said two sources familiar with the matter.

“Morgan Credits has not yet intimated us of any new update,” said Revati Kasturi, senior director at Credit Ratings. “Whenever anything new (pre-payments or repayments) happens, the issuer approaches its credit rating company only when the money reaches the investor’s bank account.”

The usual procedure is that the issuer informs its credit rating company, which in turn checks with the trustee in case of any bond repayments (principal or coupon repayments). The rating company reserves its views until confirmation from the trustee.

A spokesperson for Reliance Mutual Fund declined to comment. A spokesperson for Franklin Templeton said it doesn’t comment on individual securities in the portfolio.

Investors believe that the ratings assigned to these instruments could be shaky due to the sharp fall in stock prices in the last few months. The stock plunged from a high of ₹386 in August to a low of ₹165 on Sep 28 before recovering to ₹196 on November 26.

Mutual funds have an exposure of about ₹1,400 crore to the lender. They have securities of ₹4,000 crore against this exposure at current prices and, to be sure, there is no breach of any covenant yet.

The YES Bank stock has turned more volatile in the past few weeks as at least three directors have resigned from the board. Former State Bank of India chairman OP Bhatt also quit the CEO selection panel about 10 days ago.

“While calculating the limit of ₹1,160 crore, total outstanding borrowings (excluding accrued interest) as well as all future contingent exposures (including but not limited to corporate guarantee, undertaking etc) of MCPL shall be taken into account, while the debt cap (i.e. ratio of total borrowings of MCPL to market value of YES Bank shares held by MCPL shall not exceed 0.5x at all times,” Care Ratings said in its rating statement issued in July this year.





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