Synopsis
Yes Bank will soon declare JC Flowers ARC as the winner and will transfer its distressed loans to the firm, making it a virtually zero bad loans bank.
Cerberus Capital and Asset Reconstruction Company of India (Arcil) have dropped out of the race to acquire more than ₹48,000 crore of distressed loans of Yes Bank.
They did not submit a counter-bid against a binding offer by JC Flowers ARC, two people aware of the development said.
Yes Bank will soon declare JC Flowers ARC as the winner and will transfer its distressed loans to the firm, making it a virtually zero bad loans bank.
The private bank, which received an offer of ₹11,183 crore for its distressed loan portfolio from JC Flowers ARC, invited counter-bids by September 7 under a Swiss challenge auction.
In the first round of auction, JC Flowers ARC emerged as the highest bidder, ET reported on May 20. If the Cerberus-Arcil team had given a counter-offer, JC Flowers ARC would have had the first right to match it.
Rahul Gupta, chairman and CEO of JC Flowers ARC, declined to comment.
Failed to Strike a Deal
Yes Bank and Arcil did not respond to ET's requests for comment. "The long-stop date of closing the transaction is 60 days from the official date of announcement of the deal. During this time, the bank will acquire 20% equity for ₹350 crore," said one person.
Yes Bank initially invited counteroffers by August 29 and later extended the deadline to September 7 following a request by the Cerberus-Arcil team.
Avenue Capital - which owns a majority stake in Arcil - and Cerberus Capital failed to strike a deal, following which they decided to drop out, the second person said.
JC Flowers ARC's ₹11,183 crore offer is a structured deal comprising 15% cash consideration and the balance in the form of security receipts.
The 15% cash consideration would imply that the ARC must arrange ₹1,677 crore as upfront cash payment.
It would issue security receipts for the balance 85% which would be redeemed as the ARC recovers the loans.
Yes Bank's exposure to Essel Group, Radius group and the Anil Dhirubhai Ambani Group are among the loans that would be sold to the ARC.
In May, Cerberus and JC Flowers ARC separately submitted binding offers to acquire Yes Bank's distressed loan portfolio.Though the offer from Cerberus was higher, the bank picked JC Flowers since it had an operational ARC making the transfer of stressed loans seamless, said a person cited earlier in the story.
Before bidding, Yes Bank indicated that it would prefer to sell its non-performing loans to a bidder with an operational ARC.
This prompted Cerberus to initiate talks for equity in an ARC. It offered to acquire a stake in International ARC, backed by Blackstone and later in ARCION Revitalisation, an ARC jointly owned by Apollo Global and ICICI Bank. However, talks with these two ARCs remained inconclusive.
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