Private-sector lender Yes Bank said Friday it has signed a binding agreement to offload a huge block of stressed loans to JC Flowers Asset Reconstruction Pvt. Ltd.
The move follows an enabling approval of the board of directors on May 6 and the final approval from the board credit committee on July 13, the bank said.
Accordingly, the bank has decided that JC Flowers ARC will be base bidder for a proposed sale of an identified stressed loan portfolio of aggregating to up to Rs 48,000 crore ($6 billion).
The bank said it plans to run a bidding process on the Swiss Challenge basis for the sale of such portfolio using JC Flowers ARC’s bid as the base offer.
This means while new bidders would be allowed to bid on top of the base price, JC Flowers will have the right to match the higher bid.
JC Flowers had offered around Rs 12,000 crore to buy the bad loans, pipping other suitors like Cerberus.
JC Flowers ARC is a three-way JV between JC Flowers, Emso and Eight Capital. Eight Capital is looking to exit the venture by selling its 35% stake in the ARC.
Yes Bank had faced headwinds two years ago over corporate governance concerns related to co-founder and former chief Rana Kapoor leading to his exit and the entry of state-controlled lender SBI to steer the company.
The private-sector lender had previously offered to create a new ARC for bidding for its own stressed assets, only to be shown a red signal from the Reserve Bank of India. It is now likely to pick up a 20% stake in the JC Flowers ARC.
The deal will allow Yes Bank to become NPA-free and make for a more attractive value proposition for prospective private equity investors who have been eyeing a stake in the company.
SBI currently owns a 30% stake and is the single largest shareholder in Yes Bank.