InvestorQ : What exactly happens to the holders of AT1 bonds of Yes Bank and what about the
diksha shah made post

What exactly happens to the holders of AT1 bonds of Yes Bank and what about the

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Dawn Cherian answered.
2 months ago

When Yes Bank was restructured in March by the RBI and majority ownership given to SBI, it began with writing off Rs.8415 crores worth AT1 Bonds. This was done by RBI by invoking a rule that permitted such a write-off vide Basel guidelines. This led to a series of protests with the Axis Trustee Company even filing a suit in the Bombay High Court. Even 63 Moons, which had invested Rs.300 crore, has filed a suit in the Madras High Court.

It may be recollected that AT1 bonds were issued as quasi equity and as Tier-1 capital bonds. They were substantial more risky than regular bonds but also offered a much higher yield. Most investors were lured by the high returns offered although there have also been cases of mis-selling by the sales staff of Yes Bank and other distributors. Apparently, the AT1 bonds were sold by Yes Bank executives as Super-FDs.

However, RBI defended its position saying that the writing off has been undertaken under the provisions of the contract between Yes Bank and AT-1 Bondholders. By writing-off the AT-1 Bonds, the capital infused by the PSU banks is not diluted, which is logical and fair. The new Yes Bank chief also mentioned that investors had bought these bonds with their eyes open. Hence it would be naive to complain about it. It looks the matter should rest as it is.