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Yes Bank Faces Coupon Payout Hurdles Despite Supreme Court Ruling on AT-1 Bonds
Reported by Abhishek Tiwari (Copy Editor) · Livemint - Markets ·
Reported by one source so far
Photo: Wikimedia CommonsYes Bank is unlikely to pay coupons due this year on its Additional Tier-1 bonds despite a recent Supreme Court ruling overturning their write-off during the lender's 2020 rescue.
Payments And Review
Retail investors holding the bonds stated that they did not receive coupon payments due on October 18, which was three days after the apex court decision. In a letter to Axis Trustee Services Ltd, investors urged the debenture trustee to obtain written confirmation from the lender on whether the coupon has been paid, cancelled, or remains outstanding. The bank is reportedly preparing to seek a review of the ruling. Sources stated that the bond documentation gives the bank discretion over coupon payments and that the issue can only be considered once the bonds are reinstated on the balance sheet.
Court Verdict And Rescue
Last week, the Supreme Court upheld the Bombay High Court judgment against the write-down of AT-1 bonds worth ₹8,415 crore, which had been undertaken in March 2020 during the bank's reconstruction. The apex court dismissed appeals filed by Yes Bank, the Reserve Bank of India, and the Union government. The lender had plunged into a liquidity crisis in March 2020 as bad loans mounted, prompting the Reserve Bank of India to take control and assemble a consortium of lenders led by the State Bank of India to inject fresh equity capital.
Capital Impact
Yes Bank stated in an exchange filing that its Common Equity Tier 1 capital ratio could decline by about 250 basis points. However, the bank's overall Tier 1 capital ratio is expected to remain unchanged at 14% on a pro forma basis. The bank also noted that it has access to various capital-management levers and retains the flexibility to undertake additional capital actions to pursue its growth objectives.
Context
Additional Tier-1 bonds are perpetual instruments issued by banks to strengthen their capital base and typically offer higher interest rates due to their higher risk profile. Under financial distress, these bonds can be written down to absorb losses, making legal disputes over their cancellation a complex challenge for both lenders and investors.
ExplainerWhy this matters
What Happened
The Supreme Court dismissed appeals by Yes Bank, the RBI, and the Union government, upholding a previous high court ruling against the write-down of ₹8,415 crore in AT-1 bonds that were cancelled during the lender's 2020 rescue.
Why It Matters
This case sets a major precedent for how bank rescues and bondholder rights interact in India. AT-1 bonds are meant to absorb losses when a bank fails, but the dispute hinges on whether the write-down process followed proper legal and contractual frameworks, directly affecting millions of rupees invested by retail and institutional bondholders.
What Happens Next
Yes Bank is preparing to seek a review of the Supreme Court ruling, while trustees and bondholders press for clarity on unpaid coupons and the formal reinstatement of the bonds on the bank's balance sheet.
