LVB bond write-down credit positive for creditors, depositors: Moody's

The decision to write down tier-II bonds of Lakshmi Vilas Bank before its merger with DBS Bank India Ltd is credit positive for depositors and senior creditors due to loss-absorption capacity of such instrument. However, the move is credit negative for holders of LVB’s basel III compliant bonds as they will lose their investment, according to rating agency Moody’s.

Terms and conditions of Indian Basel III compliant AT1 and tier-II securities specify that such securities will be written down before authorities can step in to support a bank.

On November 26, LVB announced that it has written down in full its Basel