March 11, 2020 / 9:25 AM / 3 months ago

Yes Bank administrator says deal with bondholders 'in process'

MUMBAI (Reuters) - The administrator of India’s Yes Bank told Reuters a deal with some bondholders who have opposed a state-led rescue was under discussion, possibly clearing the way for a restructuring of the stricken lender.

FILE PHOTO: People wait outside a Yes Bank branch to withdraw their money in Ahmedabad, India, March 6, 2020. REUTERS/Amit Dave/File Photo

“We are in the process,” said Prashant Kumar, the administrator appointed by the Reserve Bank of India (RBI), which has taken control of Yes Bank. He hoped a deal would be reached later on Wednesday or on Thursday, he said, but declined to provide details of the discussions.

Under the terms of India’s rescue plan, set out earlier this month, the State Bank of India would take a 49% stake in Yes Bank, which is struggling with bad loans.

But some Yes Bank bondholders filed a court petition against the rescue deal, which would see them taking a writedown, according to a source and a document seen by Reuters.

TV channel ET Now reported on Wednesday the bondholders had proposed to convert 85 billion Indian rupees ($1.15 billion) worth of bonds into 17 billion rupees in equity, citing unnamed sources.

Axis Trustee Services Ltd, which represents several investors in Additional Tier 1 (AT1) notes issued by Yes Bank, did not immediately respond to a request for comment.

AT1 securities are a type of contingent convertible bond (CoCo) - perpetual instruments designed after the financial crisis to try to ensure investors, rather than taxpayers, would be on the hook if a bank runs into financial difficulties.

India’s central bank, the Reserve Bank of India (RBI), also did not immediately respond to a request for comment.

Yes Bank has battled for months to raise the capital it needs to meet regulatory requirements. Since late last year, it had been trying to raise $2 billion, and in February delayed its quarterly results.

The bank is the third significant Indian financial institution to unravel in the last six months, following the RBI’s moves to take control of Dewan Housing and Punjab & Maharashtra Co-operative Bank.

The bondholders’ petition was set to be heard in court on Wednesday but the case did not appear on a Bombay High Court schedule seen by Reuters.

Yes Bank’s founder and former managing director, Rana Kapoor, who was arrested on Sunday on money-laundering charges, will remain in police custody until March 16, an Indian court said on Wednesday.

Kapoor denies accusations and his lawyer said he had been made into a scapegoat because of public resentment at Yes Bank after the central bank imposed limits on withdrawals.

Writing by Alexandra Ulmer; Editing by Pravin Char/Barbara Lewis

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