The ABC of AT-1 bond crisis

Investors making a brouhaha about the proposed write-down of their AT-1 bond investment is nothing but an unethical attempt by these investors to subvert the regulatory process, writes Sudarshan Sen

The draft reconstruction scheme for YES Bank proposed by the Reserve Bank of India (RBI) seems to have really put the wind up the investors in the additional tier 1 (AT-1) capital bonds issued by the bank. These investors are crying foul, claiming that despite the AT-1 bonds being “senior” to common equity shares, they are being written down, whereas the equity shares are not. Fund house managers are expressing surprise at the RBI’s interpretation of the rights of AT-1 bondholders vis a vis equity shareholders. Market gurus are fretting about the impact of such a write-down on investor appetite