Yes Bank gets firm offers from Jc Flowers & Cerberus for its arc

Two private equity firms have submitted binding bids to acquire a stake in Yes Bank’s proposed asset reconstruction company (ARC), two people with knowledge of the development told CNBC-TV18.

U.S. firms Cerberus Capital and JC Flowers & Company submitted binding bids, while other shortlisted players Oaktree Capital and Apollo Global Management stayed away, according to people with knowledge.

The deadline for submitting binding offers for the ARC ended on Saturday 5 February.

CNBC-TV18 previously reported that four private equity players were shortlisted from a dozen expressions of interest (EOIs) submitted for ARC activity, namely Cerberus Capital, JC Flowers and Company, Oaktree Capital and Apollo Global. Management.

“We need to look at both the financial and non-financial aspects of the offer to make a decision,” a person with direct knowledge said, adding that details of the offers submitted on Saturday were not yet reviewed.

When asked if the differences between JC Flowers and its joint venture partner Eight Capital would affect the offer it made, this person replied, “As far as the bank is concerned, JC Flowers made the offer. Whether or not they come with their partner or hire someone else for another business.

CNBC-TV18 has reached out to Yes Bank for comment, but no response has been received as of this story’s publication. Responses from Cerberus Capital and JC Flowers and Co are also expected.

“Of the 15 EOIs (expressions of interest) we have received, we expect many players like Edelweiss and SSG to participate in the auction process via the Swiss Challenge method to buy loans, even if they do not ‘did not submit binding offers,’ said one of the people quoted above.

Yes Bank had received EOIs from more than a dozen players for its proposed ARC last year. Brookfield Asset Management, Ares SSG, Oaktree Capital Management, JC Flower, Vardhe Capital, CarVal Investors, Avenue Asia Group, Bain Capital’s India Resurgent Fund, Cerberus Capital, Apollo Global Management, Rohatyn Group and Silver Point Capital were among the players who submitted EOI. Four of them were then pre-selected by the bank. Yes Bank has appointed Ernst & Young as process advisor.

According to people in the know, Yes Bank will hold a 20% stake in ARC, with the remaining stake held by the foreign partner. “We have in mind a 20% stake for Yes Bank and the rest for the partner, but the final structure will have to be in line with RBI’s comfort,” a person in the know said.

The bank is seeking to transfer more than Rs 50,000 crore in loans to ARC. The size of the deal is expected to be around Rs 12,000-15,000 crore, CNBC-TV18 had reported.

Considering the 15:85 transaction structure of ARCs, where 15% is given as cash and 85% as security receipts, this will result in the overseas partner bringing in around Rs 1450-1800 crores of cash for its 80 percent stake, CNBC-TV18 had reported

The bank, while inviting EOIs for its ARC earlier, had stipulated that an investor must have minimum assets under management and globally deployed funds of at least $5 billion.

This is Yes Bank’s second attempt to set up an ARC. Last time around, the Reserve Bank of India rejected his proposal to set up an ARC as they did not want the bank to be the majority shareholder due to potential conflicts of interest.

Even after the foreign partner has been shortlisted, the bank will need to reapply to RBI to seek approval for the ARC license. Setting up the business will ultimately depend on how comfortable the regulator is with the proposed structure.

Yes Bank reported gross non-performing assets of Rs 28,654 crores and total gross restructured loans of Rs 6,878 crores as of December 31, 2021. Its gross NPA ratio stood at 14.7% and its net NPA ratio at 5 .3% for the third quarter.

(Edited by : Pradeep Suresh V)

First post: STI

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