Indian top court deems Yes Bank AT1 bond write-off illegal

what happened

India's top court has concluded that the write-down of Yes Bank additional tier-1 bonds worth 84 billion Indian rupees, roughly $884 million, was unlawful. A Supreme Court lawyer involved in the matter shared the decision on Thursday, and Reuters reported it. Reports differ slightly on the dollar figure, citing $884.37 million and $884.47 million.

AT1 bonds pay higher yields but typically risk being written off or converted into equity during a crisis. These bonds were wiped out after Yes Bank was declared insolvent in 2020, while shareholders received a three-year lock-in on 75% of their shares under the restructuring plan. Srijan Sinha, a partner at Edictum Law & Co. representing the bondholders, said the administrator's write-off contradicted the final reconstruction scheme gazetted by the Union of India.

Yes Bank shares fell 13% on Thursday. The bank did not immediately comment in response to Reuters' request.

why it matters

The ruling matters for a bond class already under scrutiny since Credit Suisse wiped out its AT1 bonds in 2023. Grant Thornton partner Vivek Ramji Iyer said the decision appears to rest on a technicality rather than the product's underlying terms, and that it could create regulatory uncertainty that weighs on investor sentiment.

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