Supreme Court stays order to write-off Yes Bank’s AT1 bonds

New Delhi:

The Supreme Court today stayed a trial court order to write-off Additional Tier-I (AT1) bonds issued by Yes Bank.

The Supreme Court was hearing Yes Bank’s appeal against a Bombay High Court judgment that set aside an administrator’s decision to write off 84.5 billion rupees ($1.03 billion) of AT1 bonds in March 2020. Lender.

The RBI had appointed an administrator in March 2020 to manage the affairs of Yes Bank after its financial position deteriorated severely.

AT1 bonds are high-yield securities that usually have loss-absorbing features, meaning they can be written off if the lender’s capital falls below a critical level, which was applied in Yes Bank’s case. it was done.

State Bank of India had stepped in to rescue the lender as part of a restructuring exercise along with ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank and Housing Development Finance Corp.

In the hearing on Friday, Yes Bank’s counsel Kapil Sibal argued that the write-off in AT1 bonds was a part of a “deliberate” restructuring exercise. Kapil Sibal said that without the AT1 bond write-off, banks would not have infused money into Yes Bank.

The High Court, while giving its verdict on January 20, had stayed the order for six weeks.

The Supreme Court on Friday extended the stay of the High Court till further orders.

Meanwhile, Solicitor General Tushar Mehta, counsel for the RBI, said that not extending the stay of the trial court would mean that Yes Bank would again become a non-viable lender, and would put the interests of many depositors at risk.

Mukul Rohatgi, the counsel representing the bondholders, argued that the write-off of the AT1 bonds was wrong in law. Rohatgi said that the administrator of Yes Bank did not have the authority to underwrite the bonds.

The Supreme Court will next hear the matter on March 28.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)