Fund With Most Yes Bank Local Bonds Marks Them Down to Zero
Nippon Life India AMC’s decision to mark down its Yes Bank debt exposure underscores uncertainties facing the bank’s creditors.
(Bloomberg) -- A mutual fund that held the highest proportion of rupee bonds issued by Yes Bank Ltd. wrote down the value of those holdings to zero after the central bank seized control of the embattled lender.
Nippon Life India Asset Management Ltd.’s decision to mark down its exposure to the lender underscore the uncertainties facing the bank’s creditors on the repayment front.
Indian funds have taken a similar approach in the past with an aim to protect the interest of existing unitholders by forestalling withdrawals. Franklin Templeton Asset Management (India) Pvt. in January marked down its investments in bonds of Vodafone Idea Ltd. following an adverse court ruling.
The move by Nippon does not indicate any reduction or write-off of the amount repayable by Yes Bank. The fund’s step comes as Yes Bank’s 3.75% dollar notes due February 2023 fell as much as 9.6 cents to 81.87 cents, the most since its issuance in January 2018, before recovering to 86.8 in evening trade in Hong Kong. The bonds on Thursday rose by a record 9.5 cents, according to prices compiled by Bloomberg.
“Other funds will also evaluate appropriate valuations on these bonds,” said Kaustubh Belapurkar, director of manager research at India unit of Morningstar Investment Adviser. “Given the Yes Bank development, debt investors will accentuate their search for safety over yields.”
Marking down the investment’s valuation “reflects the uncertainties around the realizable values but does not in any manner indicate any reduction or write off of amount repayable by Yes Bank or eventually realizable by plans holding these instruments,” according to an emailed statement from Nippon.
To contact the reporters on this story: Bijou George in Mumbai at bgeorge66@bloomberg.net;Anurag Joshi in Mumbai at ajoshi53@bloomberg.net;Nupur Acharya in Mumbai at nacharya7@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Anto Antony, Ravil Shirodkar
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