'Adequate liquidity to meet obligations,' says YES Bank after rating downgrade on bonds

A day after rating agencies downgraded upper tier II bonds of YES Bank to default, the private sector lender said it has adequate liquidity to meet all its obligations. "For Basel II, upper tier II bonds, the specific features of the instrument require debt servicing to be linked to the bank meeting regulatory norms on capital adequacy," Yes Bank said in a regulatory filing on Wednesday.

"The Bank in its FY 2019-20 financial results, announced on May 6, 2020, had declared that it did not meet the regulatory capital ratio requirement as on March 31, 2020 and therefore its inability to service the coupon due on June 29, 2020, is solely a function of the Bank being below the regulatory capital threshold as on March 31, 2020," it added.

The bank would like to stress that the coupon on these 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 lender also said.

Rating agency ICRA on Tuesday downgraded the Basel II-compliant upper tier II bonds of YES Bank to default rating. The Rs 1,344 crore worth upper tier II bonds have been downgraded to ICRA D rating from BB rating earlier after the Reserve Bank of India (RBI) barred the private sector lender from paying interest (coupon) on the tier II bonds as it failed to meet regulatory requirements on capital adequacy ratio.

Similarly, CARE Ratings said that it downgraded the upper tier II  bonds after taking into consideration their increased sensitivity to YES Bank's capital adequacy ratio, capital raising ability and profitability during the long tenure of the instruments.

Shares of YES Bank ended the intraday trade at 27.05, down 0.55 points or 1.99 per cent on NSE.

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