Icra downgrades rating on certain Yes Bank bonds

Domestic rating agency Icra on Tuesday downgraded the rating on certain bonds of Yes Bank, days after RBI restrained the lender from making repayments to bondholders on account of capital being below the mandated levels.

Domestic rating agency Icra on Tuesday downgraded the rating on certain bonds of Yes Bank, days after RBI restrained the lender from making repayments to bondholders on account of capital being below the mandated levels. The rating on six Basel-II compliant upper tier II bonds totalling up to Rs 32,611 crore have been downgraded to 'D', according to a statement.

RBI had refused to accede to a bank's request to pay the interest on the bonds issued in 2012 due on June 29 because of the low capital levels. The bank, which is preparing for raising capital at present, had asserted that it has sufficient liquidity to meet all requirements. "The timely servicing of the upcoming coupon, which is cumulative in nature remains constrained and the same is likely to be paid only when the bank achieves a CRAR of 9.0 per cent," Icra said.

The latest rating also take into account the reported net loss of Rs 16,418 crore in FY20 and the CRAR of 8.50 per cent as on March 31, despite the sizeable capital infusion by new shareholders and the write-down of the Additional Tier I (AT-I) bonds in Q4 FY20, it added. CRAR is Capital to Risk Weighted Assets Ratio (CRAR).

The rating agency also acknowledged that Yes Bank is at "advanced stages" of raising the capital but the same is unlikely to be concluded before June 29. Further, the rating also factors in the likelihood of high credit costs owing to the weak operating environment coupled with the high overdue advances (Special Mention Accounts) that stood at 7 per cent of the standard advances as of March.

The support from SBI and other lenders, who poured in Rs 10,000 crore for the bailout, is a key credit strength while ability to raise deposits, large capital requirements and likely pressures on operating profits are among the challenges, as per Icra. Yes Bank shares closed 0.54 per cent down at Rs 27.60 apiece on the BSE on Tuesday as against gains of 1.49 per cent on the benchmark.

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