Cerberus Looks To Tie Up With Arcil For Yes Bank Stressed Assets — BQ Exclusive

The offer will be largely funded by Cerberus Capital while Arcil will work as the resolution agent, the people quoted above said. Yes Bank's stressed asset portfolio includes non-performing assets, non-performing investments and written-off accounts.

Queries emailed to Cerberus, Arcil and Yes Bank on Thursday didn't elicit a response.

The bidding process is being conducted under the Swiss auction route, where JC Flowers is the base bidder. JC Flowers ARC has submitted a bid worth Rs 11,183 crore for the stressed assets, Yes Bank had declared. Under the Swiss auction route, challengers can improve upon the base bid, but the base bidder retains the right to match the new offer.

While Cerberus Capital has been in the race for Yes Bank's stressed assets since earlier this year, the bank chose JC Flowers owing to the asset reconstruction company license it possesses, BQ Prime had reported earlier.

The Cerberus and Arcil partnership is expected to place a competitive bid, but JC Flowers too will look to remain competitive, the third person quoted above said. The pool of stressed assets on sale includes 250 different loan accounts, this person said.

Once the sale of the stressed assets is concluded, Yes Bank's gross NPA ratio will drop to around 2%, the bank's Chief Executive Officer Prashant Kumar had previously said.

As of June 30, Yes Bank's capital adequacy ratio stood at 17.7%, which included a common equity Tier-1 capital ratio of 11.9%. The bank reported a net profit of Rs 311 crore during the first quarter, with a gross non-performing asset ratio of 13.4%.

The sale of bad loans is a key part of Yes Bank's turnaround story, after the bank was placed under a reconstruction plan in March 2020 by the Reserve Bank of India. Yes Bank has said that it has exited the reconstruction plan, with its financial position having improved significantly since March 2020.

The bank said it has also entered into an agreement with private equity firms Carlyle Group and Advent International to raise over $1 billion (Rs 8,898 crore) in equity capital. In exchange, Yes Bank will allot 10% stake to each investor. The transaction is subject to regulatory approvals.

The equity infusion is set to raise the common equity Tier-1 capital ratio to 15.7%, from 11.9% currently, Kumar had told BQ Prime in an interview.

India's largest lender State Bank of India is currently the biggest shareholder in Yes Bank, with a 30% stake. Under the reconstruction scheme, all shareholders having more than 100 shares of the bank were subjected to a three-year lock-in period, wherein they had to hold on to 75% of their holding for this period. This lock-in period ends in March 2023.