Yes Bank has chosen JC Flowers ARC as a joint venture partner to sell impaired debts worth Rs 51,000 crore.

  • May 20, 2022, 12:08 p.m.

Yes Bank  NSE 3.72 % has picked JC Flowers Asset Reconstruction Company (ARC) as its joint venture partner to offload nearly ₹51,000 crore of distressed loans - a move that the private sector bank believes could improve its valuation and help attract equity investors it badly needs, said two people aware of the development.

Yes Bank invited bids for its distressed loans portfolio, amounting to ₹51,000 crore, soon after the Reserve Bank of India in March 2021 rejected its plan to set up an ARC as its subsidiary. The transaction, once completed, will be India's largest sale of distressed assets that will result in Yes Bank becoming nearly a zero non-performing asset (NPA) bank, making it easier for the bank to raise capital.

Last week, Yes Bank declared JC Flowers ARC as the highest bidder with Cerberus Assets Management, one of the largest distressed assets investors, coming a close second. JC Flowers offered ₹12,000 crore while Cerberus made a marginally lower offer, said the people cited above. Yes Bank will soon hold a Swiss challenge auction wherein it would invite counter bids with JC Flowers ARC's offer as an anchor bid, the people said. If Yes receives a higher offer, JC Flowers will have the right to match it. Rahul Gupta, chairman and CEO of JC Flowers ARC, could not be reached for comment. Cerberus and Yes Bank did not respond to ET's request for comment.

Of JC Flowers ARC's ₹12,000 crore offer, 15% will be paid upfront in cash while the balance would be in the form of security receipts to be redeemed as the ARC recovers money from defaulting borrowers.

Terms of the Proposal

As per the proposal submitted by the ARC, Yes Bank will pay 1.5% management fee and 5% recovery incentive on each account. This apart, the agreement also has an upside sharing component for the winning bidder when the recovery is above a pre-specified threshold, the people cited above said.

Rana Kapoor founded Yes Bank, which was bailed out by the 

State Bank of India

 NSE 2.84 % two years ago, is seeking to raise Rs 10,000 crore equity for over a year but is unable to strike a deal yet due to the huge quantum of NPAs in its books. The bank is in talks with Advent International and Carlyle to raise equity, as reported by ET.

In the first week of May, Yes Bank invited binding bids. Since JC Flowers ARC already operates as an ARC in India, it may have scored over Cerberus, one of the persons cited above said. Yes Bank had initially invited offers for a joint venture partner for floating an ARC wherein it would pick up a 20% stake and offload a bulk of its NPA to it.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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