- 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
- The junior bond holders were wiped out (called the AT1 holders)
- 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
- The bank reported a completely horrendous quarter as expected with a 24k Crores INR loss before adjusting for taxes
- 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.
- The moratorium will be lifted on Wednesday.
This week will be very crucial for Yes Bank.
- Unless the banks that have contributed equity also are lining up term deposits, the future still looks very uncertain.
- 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.
- 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.
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