Yes Bank unlikely to pay AT1 coupons despite court ruling

Yes Bank is unlikely to pay coupons due this year on its additional tier-1 (AT1) bonds, even after the Supreme Court upheld a decision overturning their write-off during the lender’s 2020 rescue, Reuters reported on October 22 in an account carried by Economic Times Markets, citing two people familiar with the matter.

The lender is preparing to seek a review of the judgment, one of those sources said. Bondholders, meanwhile, are pressing for coupons that have remained unpaid since the bonds were written off six years ago. Yes Bank did not respond to an emailed request for comment; the reported position on payment is therefore not a public announcement by the bank.

Investors seek clarity on October coupon

The Supreme Court last week upheld the Bombay High Court’s 2023 ruling setting aside the write-off of ₹8,400 crore in AT1 bonds. The decision went against the position defended by the lender and regulators.

Retail bondholders said on Thursday that they had not received coupons due on October 18, three days after the Supreme Court ruling. In a letter to Axis Trustee Services Ltd reviewed by Reuters, investors asked the debenture trustee to obtain written confirmation from Yes Bank on whether the coupon had been paid, cancelled or remained outstanding.

The investors cited the court’s direction that annual coupon payments would remain unaffected by the outcome of the appeals and must be made according to the Information Memoranda governing the bonds.

Bond terms and accumulated losses remain central

The sources offered a different reading of the payment obligations: they said the bond documents give Yes Bank discretion over coupons and that payment could be considered only after the AT1 bonds were reinstated on its balance sheet. The sources were not named because they were not authorised to discuss the matter.

A third person familiar with the issue said losses accumulated in fiscal years 2020 and 2021 were expected to be fully offset only by fiscal 2028, potentially weighing on a decision to pay coupons. That timing is a source’s expectation, not a confirmed financial outcome.

The lender’s latest annual report records a ₹5,279 crore debit balance in its profit and loss account, according to the reporting. The dispute thus extends beyond reversal of the write-off to how the bond terms and the court’s directions apply to coupon payments; the report does not establish that payment has been authorised or made.