'People were crying on Yes Bank AT1 bonds. Imagine the UHNIs who have invested in AT1 bonds of Credit Suisse,' says a Twitter user 
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'People were crying on Yes Bank AT1 bonds. Imagine the UHNIs who have invested in AT1 bonds of Credit Suisse,' says a Twitter user The rudest shock in the government-brokered deal to save embattled Swiss lender Credit Suisse Group AG was reserved for the holders of the bank's bonds but investors on Twitter were quick to draw a parallel with the Yes Bank saga.
Not only did the bondholders discover they are the only investors not getting any compensation but the long-established practice of giving bondholders priority over shareholders in debt recovery had been turned on its head.
Swiss authorities brokering Credit Suisse's rescue merger with UBS have said 16 billion Swiss francs ($17 billion or Rs 1.4 lakh crore approximately) of its Additional Tier 1 (AT1) debt will be written down to zero. AT1 bond holders rank below those holding equity stakes in Credit Suisse who can expect to receive 0.76 Swiss francs per share.
Investors who stand to lose their investments in Yes Bank's AT1 bonds were quick to see the humour in a similar story in Credit Suisse collapse.
"The writing down of the $17bn AT1 bonds to zero could result in chaos to the $ 275bn size of AT1 market in Europe. This is exactly similar to #YesBank write down of similar bonds in India," quipped a Twitter user.
"Damn... People were crying on Yes Bank AT1 bonds. Imagine the UHNIs who have invested in AT1 bonds of Credit Suisse," quipped another Twitter user.
"AT 1 bond has become the riskiest investments. AT 1 bond holders are the biggest loser in case a bank fails. Even equity carries less risk than AT 1 bonds," said another Twitter user.
Created in the wake of the global financial crisis, AT1 bonds are a form of junior or hybrid debt that counts towards banks' regulatory capital.
They were designed as a part of total loss-absorbing capacity (TLAC) bonds to provide a 'bail-in' or a way for banks to transfer risks to investors and away from taxpayers if they got into trouble.
The AT1 bonds, which also carry a higher coupon, can be converted into equity or written down when a lender's capital buffers are eroded beyond a certain threshold.
AT1 write-downs have taken place in several countries, including Spain, Greece, Austria and Denmark.
Earlier this month, Supreme Court had put on hold Bombay High Court's ruling on writing down Yes Bank's AT1 bonds.
In January, Bombay High Court quashed a decision taken by the Yes Bank Administrator on March 14, 2020 to write off Additional Tier 1 (AT1) bonds noting the Administrator did not have the authority to take such a decision.
Yes Bank Ltd had written off AT1 bonds worth Rs 8,415 crore as part of the bailout in March 2020.
Kotak Mahindra Bank CEO Uday Kotak said the write off of AT1 bonds has a "signal for all bankers and stakeholders".
"Credit Suisse sold to UBS for 3 bn $. 60%discount to stock value at Friday closing. ~600 bn $ balance sheet sold for 3 bn $ equity value. 17 bn $ of AT1 bonds written off. A signal for all bankers and stakeholders, when risk return matrix is overtaken by obsession with size," tweeted Kotak on Monday.
Also Read: TCS, Infosys Wipro: How Credit Suisse, SVB collapse can impact Indian IT sector
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