Bombay HC said to quash write-off of Yes Bank's AT1 bonds

The bonds were written off as part of a restructuring plan to rescue Yes Bank in March 2020. Equity holders, on the other hand, did not face a similar write-down, but 75% of their shares were subject to a lock-in for three years

The Bombay High Court, in an oral pronouncement on Friday, quashed the write-off of additional Tier-1 (AT1) bonds issued by Yes Bank Ltd., said legal sources with direct knowledge of the matter.

The final order is yet to be uploaded on the court website and the bank can choose to appeal in Supreme Court.

The bonds were written off as part of a restructuring plan to rescue Yes Bank in March 2020. Equity holders, on the other hand, did not face a similar write-down, but 75% of their shares were subject to a lock-in for three years.

Additional Tier-1 bonds are high-yield securities that typically have loss-absorbing features, meaning they can be written down if a lender's capital falls below a crucial level.

This feature was invoked in the case of Yes Bank.

However, the court offered relief to bondholders with exposure of ₹84.5 billion ($1.04 billion) to these bonds.

Individual and institutional bondholders had filed several petitions in the Court, arguing that the bonds were mis-sold and could not be written off when equity was not.

"The Bombay High Court had allowed the bondholders' petition against the write-off and the decision to write off the AT1 bonds has been quashed," said Srijan Sinha, an advocate who appeared on behalf of the association of individual bondholders.

"The Court has granted Yes Bank 6 weeks to implement the order," said Mr. Sinha.

Yes Bank did not immediately offer comments on the order. An email sent to RBI was not answered immediately.