Icra, Care Cut Yes Bank's Upper Tier-II Bonds Rating

Mumbai, June 24: Private sector lender Yes Bank on Wednesday said two domestic rating agencies have cut their ratings on its upper tier-II bonds, following the Reserve Bank restraining it from making coupon payments on them due to lack of adequate capital levels.

Icra and Care Ratings have cut their ratings on the bonds to "D" possibly because any default in repayment by a company triggers the action.

The city-headquartered bank, which got a Rs 10,000 crore bail out led by SBI in March, asserted that it has adequate liquidity to meet all its obligations.

"The bank would like to stress that the coupon on these bonds (Basel II, upper tier-II bonds) is cumulative in nature and any unpaid sum will become payable once the bank meets minimum regulatory capital ratio subject to the required regulatory approvals,” the bank informed the bourses.

Care Ratings has cut its rating on outstanding bonds of Rs 940 crore to "D" from "C" as a result of the RBI refusing to accede to the bank's request of paying the coupon, a note from the agency shared by the bank said.

"Any delay in payment of interest/principal following invocation of the lock-in-clause, would constitute as an event of default as per Care's definition of default and consequently the rating for the instrument has been revised," it said.


Elaborating on the need for Yes Bank to seek RBI's approval, it said the upper tier-II bond has lock-in clause which mandates that the issuer bank cannot pay interest/principal without RBI's prior approval if it has reported loss for the year or the interest payment will lead to bank not meeting the capital adequacy norms.


Domestic rating agency Icra has downgraded the ratings on six Basel-II compliant upper tier-II bonds totalling up to Rs 32,611 crore to "D", as per the Yes Bank communication to exchanges.


The ratings take into account the reported net loss of Rs 16,418 crore in FY20 and the CRAR of 8.50 per cent as on March 31, despite the sizeable capital infusion by new shareholders and the write-down of the additional tier-I (AT-I) bonds in Q4 FY20, Icra said.


It also acknowledged that Yes Bank is at "advanced stages" of raising the capital but the same is unlikely to be concluded before June 29.