Yes Bank Bailout

  1. In a completely weird bailout, the RBI and the govt. bailed out Yes Bank with a consortium of banks pooling in equity similar to a LTCM type rescue
  2. The junior bond holders were wiped out (called the AT1 holders)
  3. But for some weird reason, the existing equity shareholders were diluted only 80% and not completely wiped out. The shareholders are however locked in for 3 years for 75% of their shareholdings above 100 shares
  4. The bank reported a completely horrendous quarter as expected with a 24k Crores INR loss before adjusting for taxes
  5. Net-net, Yes Bank for 11K Crore in equity and probably 8K Crore INR because they wrote off the AT1 bonds. This will be recorded as profits I guess as it is a bond they don’t have a repay. About 19K crore of new equity is infused in all.
  6. The moratorium will be lifted on Wednesday.

This week will be very crucial for Yes Bank.

  1. Unless the banks that have contributed equity also are lining up term deposits, the future still looks very uncertain.
  2. There is no reason why a depositor run will cease when the moratorium is lifted unless there are fresh announcements before the moratorium is lifted.
  3. While the pedigree of investors is good, it is not clear how the bank will stop a run on the bank.

All said, it will be an action filled, fast paced thriller Wednesday through Friday to watch this unfold.

Disclaimers: Own several indexes, Banks, NBFC’s, Single Name stocks etc. See FAQ’s. Not recommendations. Please do your own research.

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