Yes Bank launched a tender for its ₹51,000 crore portfolio of distressed loans shortly after the Reserve Bank of India in March 2021 rejected its plan to set up an ARC as a subsidiary company. The transaction, when completed, will be the largest sale of distressed assets in India, which will make Yes Bank a bank with almost zero non-performing assets (NPA), which will facilitate the raising of capital for the bank.
Yes Bank last week declared JC Flowers ARC as the highest bidder with Cerberus Assets Management, one of the largest distressed asset investors, coming in second. JC Flowers offered ₹12,000 crore while Cerberus made a slightly lower bid, the people quoted above said. Yes Bank will soon hold a Swiss challenge auction in which it will invite counterbids with JC Flowers ARC’s bid as its anchor bid, the people said. If Yes receives a higher offer, JC Flowers will have the right to match it. Rahul Gupta, 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 the ₹12,000 crore offer from JC Flowers ARC, 15% will be prepaid in cash while the balance would be in the form of security receipts to be redeemed as the ARC recovers the money from the defaulting borrowers.
Terms of the proposal
According to the proposal submitted by the ARC, Yes Bank will pay a management fee of 1.5% and a collection incentive of 5% on each account. That aside, the deal also has a benefit-sharing component for the successful bidder when the clawback is above a predefined threshold, the people quoted above said.
Rana Kapoor founded Yes Bank, which was bailed out by the
two years ago, is looking to raise equity capital of Rs 10,000 crore for over a year, but is unable to secure a deal yet due to the huge amount of NPAs on its books. The bank is in talks with Advent International and Carlyle to raise equity, as reported by ET.
During the first week of May, Yes Bank launched a binding tender. Since JC Flowers ARC is already operating as an ARC in India, it may have overtaken Cerberus, said one of the people quoted above. Yes Bank had originally solicited offers for a joint venture partner to launch an ARC in which it would take a 20% stake and offload much of its NPA to it.