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Prioritising Equity over AT1 bond holders in #YesBank draft resolution is a first in this country!
In all fairness @RBI is setting up a bad precedent for the bond industry by subverting their rights. Critical takeaways:
1) Scares away a potential source of capital for all banks
In all fairness @RBI is setting up a bad precedent for the bond industry by subverting their rights. Critical takeaways:
1) Scares away a potential source of capital for all banks
2) Existing AT1 holders will start dumping their stock in fear of similar subversion in future as well.
3) This can lead to a potential escalation in yields. Raising Cost of capital in future for other players
4) There have been cases of PSU bank mergers previously as well
3) This can lead to a potential escalation in yields. Raising Cost of capital in future for other players
4) There have been cases of PSU bank mergers previously as well
But never have AT1 bond holders suffered like this. Even the interest payments were not missed, leave aside capital being eroded.
5) Completely marking down the value to zero and keeping equity at 10Rs is not a legally tenable course of action.
5) Completely marking down the value to zero and keeping equity at 10Rs is not a legally tenable course of action.
