Bank loans

Yes bank loans: Cerbère-Arcil out of the race to buy Yes loans

Cerberus Capital and Asset Reconstruction Company of India (Arcil) has dropped out of the race to acquire over ₹48,000 crore worth of distressed loans from Yes Bank.

They did not submit a counter-offer against a binding offer from JC Flowers ARC, two people with knowledge of the development said.

Yes Bank will soon declare JC Flowers ARC the winner and transfer its distressed loans to the company, making it a bank with virtually no bad debts.

The private bank, which received a bid of ₹11,183 crore for its distressed loan portfolio from JC Flowers ARC, invited counterbids on September 7 in a Swiss auction.

In the first round of bidding, JC Flowers ARC emerged as the highest bidder, ET reported on May 20. If the Cerberus-Arcil team had made a counter offer, JC Flowers ARC would have had the first right to match it.

Rahul Gupta, president and CEO of JC Flowers ARC, declined to comment.

Failure to reach an agreement

Yes Bank and Arcil did not respond to ET’s requests for comment. “The closing date for the transaction is 60 days from the official announcement date of the agreement. Meanwhile, the bank will acquire 20% equity for ₹350 crore,” one person said.

Yes Bank initially invited counter-bids by August 29 and later extended the deadline to September 7 following a request from the Cerberus-Arcil team.

Avenue Capital – which owns a majority stake in Arcil – and Cerberus Capital failed to reach an agreement, following which they decided to drop out, the second person said.

JC Flowers ARC’s ₹11,183 crore offer is a structured transaction comprising 15% cash consideration and the balance in security receipts.

The 15% cash consideration would imply that the CRA has to arrange ₹1,677 crore as the initial cash payment.

It would issue security receipts for the 85% balance which would be repaid as the CRA collected the loans.

Yes Bank’s exposure to Essel Group, Radius Group and Anil Dhirubhai Ambani Group are among the loans that would be sold to ARC.

In May, Cerberus and JC Flowers ARC separately submitted binding offers to acquire Yes Bank’s distressed loan portfolio.

Although Cerberus’ offer was higher, the bank chose JC Flowers because it had a working ARC that made transferring troubled loans seamless, a person quoted earlier in the story said.

Before bidding, Yes Bank indicated that it would prefer to sell its non-performing loans to a bidder with a functioning ARC.

This prompted Cerberus to start talks for equity in an ARC. He 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 CRAs remained inconclusive.