ARCIL bids for bad loan from Yes Bank

Bombay : Asset Reconstruction Co. of India (ARCIL) has become the only candidate to acquire Yes Bank’s A bad loan portfolio of 48,000 crore, said two people with knowledge of the matter. ARC, backed by Avenue Capital, has also partnered with private equity firm Cerberus Capital to fund the offer, the sources said on condition of anonymity.

The offer also marks Cerberus’ return to the Yes Bank asset sale, which it lost in the first round.

Despite being a strong competitor, the private equity firm had lost out to JC Flowers ARC because it did not own ARC.

After accepting JC Flowers’ term sheet, Yes Bank sought expressions of interest under the Swiss Challenge method, the deadline for which ended on Tuesday.

Emails sent to ARCIL and Cerberus Capital went unanswered.

In the Swiss Challenge for Yes Bank bad debt sale, only a CRA can make the counter-bid, and the bid must be at least 5% higher than the leading bidder.

This means that since the main tenderer JC Flowers ARC had offered 11,183 crore, ARCIL’s counter-offer is at least 11,750 crores. JC Flowers ARC can still match ARCIL’s counter-offer by mid-September.

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As part of the transaction, the distressed loans will be sold on a 15:85 structure, with 15% of the agreed amount to be paid upfront in cash to Yes Bank, and the remaining 85% to be paid in security receipts. and reimbursed as ARCs. recovers money from defaulters.

“It will be a pure and simple portfolio sale according to the Swiss Challenge method. There is no proposal at this time for Yes Bank to take a stake in ARCIL as in the case of JC Flowers,” said one of the two previously quoted officials on condition of anonymity. “However, what is important is how JC Flowers react to this offer,” he added.

A Swiss Challenge allows competitors to outperform the winning bidder. If there is such a bid and the winning bidder refuses to match it, the challenger can walk away with the deal.

Mint had announced on Feb. 10 that Cerberus was in talks with Blackstone-backed International Asset Reconstruction Co. to jointly acquire Yes Bank’s stressed portfolio, but talks remained unsuccessful.

Last week, Yes Bank’s board approved the lifting 8,898 crore ($1.1 billion) by selling shares and warrants to private equity investors Carlyle Group and Advent International, a move that would strengthen the private lender’s capital position. Negotiations to raise capital had been dragging on for months and reportedly took longer than expected due to delays in the bank’s plan to find a partner to offload its stack of toxic assets.

Yes Bank having selected JC Flowers as a joint venture partner to purchase distressed loans from 48,000 crore, the bank was able to advance its fundraising plan.

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