The credit committee of Yes Bank will meet on September 15 to formally approve the sale of distressed loans totalling Rs 48,760 crore to J.C Flowers Asset Reconstruction Company (ARC), said two people aware of the development.
J.C. Flowers ARC won the non-performing loan portfolio in an uncontested Swiss auction for Rs 11,183 crore, after Cerberus Capital and Asset Reconstruction Company of India (Arcil) that had teamed up for a bid dropped out of the race, as reported by ET on September 9.
J.C. Flowers ARC will have to make the payment within 60-days of Yes Bank formally approving the offer. Its earnest money deposit of $50 million (about Rs 400 crore) could be forfeited if it failed to pay within this stipulated time, as per the terms of the auction, said one of the two people.
The deal between the bank and the ARC is under a 15:85 structure, wherein 15% is paid upfront in cash and 85% in security receipts. Effectively, J.C. Flowers ARC has to mobilise Rs 1,677 crore for cash payment within 60 days.
The ARC has initiated talks with IndusInd and Barclays to raise funds, a third person said.Yes Bank did not respond to ET’s request for comment. J.C. Flowers ARC declined to comment.
“The Avenue Capital-backed Arcil and Cerberus Capital team formally withdrew from the race since Arcil wanted a longer time for due diligence and did not want to take an investment decision solely on the intelligence provided by Cerberus,” said one of the people.
Oaktree, Apollo Global, J.C. Flowers and Cerberus had done due diligence of the portfolio.
In May, Cerberus submitted a marginally higher offer than J.C. Flowers ARC, but Yes Bank chose to strike a deal with J.C. Flowers ARC since it was an operational asset reconstruction company, making the transfer of NPAs seamless.
KPMG advised J.C. Flowers ARC for the transaction, while Alvarez & Marshal advised Cerberus.
Akash Suri, head of stressed asset management at Yes Bank, is likely to join J.C. Flowers ARC as its chief executive. Yes Bank’s distressed division team will also likely move to the ARC with Suri. Currently, Rahul Gupta is the chairman and CEO of the ARC.
“This marks a fresh start for the bank (Yes Bank) with a capital infusion of Rs 8,898 crore from private equity investors — Advent and Carlyle — and transfer of almost all its distressed loans to an ARC,” a bank analyst said. ET was the first to report on February 4 and March 4 about Advent and Carlyle being in discussions with Yes Bank for a potential $1 billion investment.
Yes Bank would acquire a 20% stake in J.C. Flowers ARC for Rs 350 crore, Prashant Kumar, CEO of the bank had announced at a press conference held in July.
Source: Economic Times