India's Yes Bank bondholders press for compliance with top court's AT-1 order

By Jayshree P Upadhyay

MUMBAI/BENGALURU, Nov 11 - India's Yes Bank YESB.NS bondholders, through their trustee, filed a contempt petition in the country's top court last week, asking the lender to comply with an order to restore its AT-1 bonds, according to a letter seen by Reuters on Wednesday.

Last month, the ​Supreme Court upheld a 2023 Bombay High Court ruling that set aside ⁠Yes Bank's write-off of 84 billion rupees ($896.02 million) worth of AT-1 bonds, in a setback ​to the lender and regulators that had defended the move.

The ruling restored the bonds, which were written down as part of the bank's 2020 rescue led by the Reserve Bank of India.

Axis Trustee Services Ltd, acting on behalf of bondholders, said in the letter that it moved the Supreme Court on November 6 after the lender failed to provide a "concrete roadmap" for restoring or reactivating the bonds and implementing the court's judgment.

Yes Bank and Axis Trustee did not respond to requests for comment outside regular business hours.

Reuters reported last month that Yes Bank was preparing to file a review petition against the ruling and that it was unlikely to resume coupon payments on the securities.

The trustee said it was seeking court directions to enforce the ruling and restore the bonds as Yes Bank had not yet complied with the order. It alleged non-compliance by the bank, certain officials and directors.

Mid-sized Indian lender Yes Bank, in which Japan's Sumitomo Mitsui Banking Corporation SUMFDS.UL now holds about a 24% stake, was declared insolvent six years ago.

Under a restructuring scheme, new investors were brought in, and its AT-1 bonds were written ​off, while equity holders faced only a three-year lock-in on 75% of their shares.

AT-1 bonds are high-risk debt instruments that offer higher ​returns but can be written off or converted into equity when a bank comes under financial stress.

($1 = 93.7475 Indian rupees)