Yes Bank to approve J.C. Flowers as buyer for its $6 billion stressed loan portfolio

Yes Bank: Yes Bank to raise Rs 8,898.47 crore from Carlyle Group and Advent by selling 10% stake each. The bank is going to raise Rs 8,898.47 crore from The Carlyle Group and Verventa Holdings (affiliate of Advent) by selling 10% stake each. The board of directors has approved to allot 369.61 crore equity shares at a price of Rs 13.78 per share and 256.75 crore warrants exchangeable into equity shares, at a price of Rs 14.82 per share, through preferential allotment on a private placement basis, which is subject to approval of shareholders and RBI. The Carlyle Group and Verventa Holdings (affiliated of Advent) will pour in money into the bank against 184.8 equity shares each and 128.37 crore warrants each.

Indian lender Yes Bank is likely to approve the transfer of stressed assets worth 480 billion rupees ($6 billion) to private equity firm J.C. Flowers at its next board meeting, said a source with direct knowledge.

A rival consortium led by private equity firm Cerberus and Asset Reconstruction Company of India withdrew its bid after submitting an expression of interest earlier this year, two sources said.

”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 had submitted an initial bid of 111.83 billion rupees for the entire stressed loan portfolio of 480 billion rupees. The Cerberus-ARCIL consortium was supposed to submit a competing bid by Sept. 7 but they withdrew, the sources said.

”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.

Yes Bank, J.C. Flowers, Cerberus and ARCIL did not immediately respond to an email request seeking comment.

Lender Yes Bank believes that its gross bad loans can come down to 2% from 13.4% in June quarter after transferring the bad loans to the new asset reconstruction company, it said earlier.

The bank had already provisioned for over 80% of the total loan value which will now be transferred to J.C. Flowers.

The transfer of stressed loans away from its book is a crucial step for Yes Bank and comes more than two years after the central bank had to step in to take control of the bank after a dramatic rise in toxic assets alarmed investors and depositors, posing a systemic risk to India’s banking sector.

The lender raised capital worth $1.1 billion by selling up to a 10% stake to Carlyle Group and Advent International in August. The confidence capital has also helped its stock rise up by nearly 40% since June 30.