L&T moves Bombay HC to secure provident funds exposure to YES Bank

Infra giant has Rs 100 crore of exposure to bank's AT-1 bonds

The infrastructure giant Larsen & Toubro (L&T), along with L&T officers and Supervisory Staff Provident Fund have moved Bombay High Court (HC) to get relief on their troubled exposures to additional tier-I (AT-1) bonds of YES Bank.

According to industry estimates, L&T has Rs 100 crore of exposure to YES Bank's AT-1 bonds, whereas the staff provident fund has Rs 25 crore of exposure to the bonds. L&T's 2019 annual report shows that firm had exposure to '9% perpetual' of YES Bank. The AT-1 bonds are also called perpetual bonds, as there is no fixed maturity date.

The matter is currently at pre-admission stage, with the next hearing date slated for tomorrow (March 12).

Employee provident funds -- which handle retirement money for employees -- have Rs 237 crore of exposure to YES Bank's AT-1 bonds, according to industry estimates.

An e-mail query sent to L&T didn't elicit any response at the time of going to press.

Earlier, Axis Trustee Services -- which represents majority of bondholders -- had moved HC to seek relief after RBI proposed full write-down of YES Bank's AT-1 bonds.

According to industry sources, bondholders that have approached the court through Axis Trustee are keen on settlement out of court. "For all involved parties, avoiding legal battle would be more desirable," said a fund manager.

The bondholders are willing to take 70-80 per cent markdown on their AT-1 bond exposures, instead of the 100 per cent write-off as proposed in RBI's reconstruction scheme.

If not superior to equity, bondholders want to at least be treated on par with the equity shareholders.

"Equity conversion of these bonds can be viable option," the fund manager said. The conversion could lead to 80 per cent of value of investments getting wiped out as equity value of YES Bank is also being re-priced for fresh equity investment.

Overall, more than Rs 8,000 crore of funds are invested in YES Bank's AT-1 bonds. Retail investors, mutual funds, provident funds, pension funds and insurance companies have exposure to these bonds.