INSUBCONTINENT EXCLUSIVE:
Axis, the trustee company representing angry bondholders, moved the court on Monday to restrain the central government and Reserve Bank of
India (RBI) from hurriedly implementing the proposed scheme to reconstruct Yes bank till it is heard and given enough time to formally put
across the views of bond investors
Bond investors -- which include asset managers, finance companies, pension funds and wealthy retail investors -- believe that the proposal
to entirely write down the value of over Rs 8,000 crore AT1 (additional tier-1) bonds is not only iniquitous, but goes against global best
practices and principles of natural justice.
According to a writ petition filed by Axis Trustee Services before the Bombay High Court, the
proposed scheme gives preference to Yes Bank promoters -- despite their mismanagement resulting in huge losses to investors and stakeholders
The court will hear the matter on Wednesday
RBI, one of the respondents, was served the petition on Monday
Other respondents to the petition are Union of India and Yes Bank.
Yes Bank was put under moratorium by RBI at 6pm on March 5
On the evening of March 6, RBI announced a draft reconstruction scheme, in which depositors and creditors were asked to share their views on
According to the petitioner, a period of three days is too short a time for bondholders to present their views as many of them were
unavailable during the weekend before the Holi festival.
While RBI has the power to write down AT1 bonds or convert them into common equity
upon occurrence of certain trigger events, the petition argues that such securities are universally ranked superior to equity and a complete
write down of AT1 bonds is possible only when Yes bank, the issuer of the bonds, goes into liquidation
withdrawing money.
Nippon India MF is the largest investor in Yes Bank AT1 bonds -- holding Rs 2,400 crore of the Rs 8,415 crore bonds
was asked to revive Yes Bank.
According to the international capital rules for banks laid down under Basel III norms, the regulatory capital
of banks is comprised of Tier1 and Tier2 capital; the Tier1 capital in turn is constituted of common equity and AT1 capital (or bonds, known
as perpetual debt in market parlance)
In India, the total outstanding AT-1 issuance by various banks is more than Rs 91,000 crore, of which private banks account for Rs 38,000
crore (as of end February).
In an email to RBI and Sebi on Sunday evening, Axis Trustee said that seniority of T1 bonds over equity is
globally established and there has been only one instance where T1 bonds of Italian bank Mone dei Paschi Di Siena was converted into equity
In the email, Axis had said that RBI could at least treat Yes Bank AT1 bonds on par with equity
Yes Bank shares (with face value of Rs 2) were trading at over Rs 21 on Monday.
The Axis petition was filed by the law firm Manilal Kher
