Yes Bank is not making coupon payments to AT1 bondholders, challenging the recent Supreme Court order that overturned a 2020 write-off of 84 billion rupees. The bank argues that interest remains discretionary and requires the debt to be formally reinstated on its books. With significant accumulated losses impacting its balance sheet, the standoff over these complex debt instruments is expected to continue.
Yes Bank has opted not to pay interest on its Additional Tier-1 (AT1) bonds, signaling that the recent Supreme Court order has not immediately triggered coupon distributions. The lender is preparing to seek a formal review of the Supreme Court's decision, which had upheld a previous ruling to set aside an 84 billion rupee debt write-off executed during the bank's 2020 emergency rescue.
SC Order Reverses 84 Billion Rupee Write-Off
The ongoing dispute centers on the status of 84 billion rupees worth of AT1 bonds. In 2020, as part of a restructuring plan, these bonds were written off, effectively erasing them from the bank's liabilities. The Supreme Court recently affirmed a Bombay High Court judgment that invalidated this write-off, essentially ruling that the debt should remain valid. While bondholders expected this to restore their rights to annual interest payments immediately, the bank has maintained a different position, leading to a missed payment on October 18.
Bank Arguments on Discretionary Payments
Management at Yes Bank is relying on the specific terms governing AT1 bonds. These financial instruments often include clauses that grant issuers discretion over coupon payments, especially if the bank’s capital ratios or profit levels are not sufficient to support the payouts. The bank argues that its obligation to pay interest is not triggered until the AT1 bonds are formally reinstated on its financial statements and accounting records. By challenging the court order through a review petition, the bank is essentially arguing that the legal victory for bondholders does not automatically bypass these contractual, discretionary clauses.
Financial Hurdles and 2028 Outlook
The core of the bank's defense is its current financial position. According to its recent annual report, the bank carries a debit balance of 52.79 billion rupees in its profit and loss account. This indicates that the bank has accumulated losses from previous fiscal years that must be absorbed before it can easily justify certain capital-intensive obligations. Financial analysts tracking the institution have noted that these legacy losses could take until fiscal year 2028 to be fully cleared. For investors, this creates a situation where even if the bonds are legally reinstated, the bank may cite its financial health as a reason to continue limiting or delaying payouts.
Investor Frustration and Next Steps
Retail investors, who have been seeking their dues for years, are now faced with the prospect of further litigation. Following the missed October 18 deadline, holders of these bonds have reached out to Axis Trustee Services Ltd, demanding written clarity on the status of their interest payments. The lack of a clear path to receiving interest, despite the Supreme Court ruling, has deepened the uncertainty. The most critical update for investors will be the outcome of the bank's proposed review petition, as it will determine whether the current legal deadlock persists or if the court will enforce immediate compliance.