JC Flowers, Cerberus vie for Yes Bank ARC
PremiumChief executive Prashant Kumar said Yes Bank plans to transfer stressed assets to the ARC by this fiscal year
American private equity firms Cerberus Capital and JC Flowers & Co. have submitted competing binding bids to buy a majority stake in Yes Bank’s proposed asset reconstruction company (ARC), said two people aware of the matter.
However, two other shortlisted US firms, Oaktree Capital and Apollo Global Management, have withdrawn from the race to set up the ARC to house the private lender’s bad loans of more than ₹54,000 crore, the people cited above said requesting anonymity.
A total of 13 companies were vying last year to acquire the bad loans. EY, which is advising Yes Bank, shortlisted four bidders who were asked to submit binding bids by 25 January.
Yes Bank will own a 20% stake in the proposed ARC with rights to appoint the chairman and key managers, Mint reported in January.
“Both bidders have submitted bids in the range of ₹10,000 to ₹12,000 crore," one of the two people said.
Yes Bank, JC Flowers and Cerberus did not respond to emailed queries.
A successful sale of bad loans is crucial for the revival of Yes Bank, which has been looking to raise funds from external investors to shore up its balance sheet. The bank’s board recently approved a fundraising of ₹10,000 crore through a mix of debt and equity.
Mint reported on 4 February that distressed asset investor Eight Capital ended a partnership with JC Flowers and London-based Emso Asset Management to bid for Yes Bank’s ARC after differences emerged over valuation.
Brookfield Asset Management, Ares SSG Capital, Varde Partners, CarVal Investors, Avenue Asia Group, India Resurgent Fund—a joint venture between Piramal Enterprises and Bain Capital Credit, Rohatyn Group and Silver Point Capital were among the 13 shortlisted applicants, Mint reported on 2 September.
In March 2020, the Rana Kapoor-founded bank was bailed out after State Bank of India and some private lenders made a ₹10,000-crore capital infusion to keep it afloat. Yes Bank, now backed by the country’s largest lender, had stipulated that an investor should have minimum assets under management and funds deployed globally of at least $5 billion.
In August, Mumbai-based Yes Bank invited expressions of interest to set up the ARC. The Reserve Bank of India had earlier rejected Yes Bank’s application to start an ARC, citing conflict of interest, Mint reported in March last year. This led the bank to tweak the proposed ARC’s structure to hold a minority stake and find more shareholders to overcome the regulatory hurdle. Yes Bank has also set up a separate team to manage the bad loans.
In a post-earnings call with investors in January, Yes Bank’s managing director and chief executive Prashant Kumar said that the bank plans to transfer stressed assets to the ARC by the end of this financial year.
“We are trying to, say, do it by March-end, but because of the covid uncertainties and regulatory approvals, it may slip to the next quarter, i.e., the first quarter of the next financial year. But we are trying to conclude it by March-end," Kumar said.
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“We are setting up an ARC and would like to shift our entire non-performing loan (NPL) portfolio. So, we would be expecting that once this transition is over, we would be having almost like zero NPL kind of thing," he added.
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