YES Bank to transfer asset worth $6 bn to private equity firm J.C Flowers

YES Bank

The next board meeting of Indian lender Yes Bank is expected to accept the transfer of stressed assets worth 480 billion rupees ($6 billion) to private equity company J.C. Flowers, according to a source with direct knowledge.

After submitting an expression of interest earlier this year, a competing consortium formed by the private equity company Cerberus and the Asset Reconstruction Company of India withdrew its offer, according to two sources.

“We evaluated the loan accounts carefully and realised that there were so many fraud-hit and other problematic accounts that recovery would have been a challenge,” said the second source.

J.C. Flowers made an initial offer of 111.83 billion rupees for the full 480 billion rupee portfolio of stressed loans. According to the sources, the Cerberus-ARCIL partnership had till September 7 to file a counterbid. However, they withdrew.

“Once the board approves the J.C. Flowers bid, it will take about a month for the paperwork to be completed and the assets to be transferred,” the first source said.

An email requesting comments from Yes Bank, J.C. Flowers, Cerberus, and ARCIL did not receive a response right away.

After moving the bad loans to the new asset reconstruction firm, lender Yes Bank anticipates that its gross bad loans would drop to 2 per cent from 13.4 per cent in the June quarter.

Over 80 per cent of the overall loan amount, which will now be transferred to J.C. Flowers, had previously been provided for by the bank.

The central bank had to intervene more than two years ago to assume control of Yes Bank after a sharp increase in toxic assets worried investors and depositors and presented a systemic danger to India’s banking sector. The transfer of stressed loans away from its book is a critical milestone for Yes Bank.

In August, the lender obtained $1.1 billion in cash by selling up to 10 per cent of the business to Carlyle Group and Advent International. Additionally, since June 30, the stock has increased by approximately 40 per cent thanks to the confidence capital.

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