Yes Bank offloads stressed asset pool to JC Flowers ARC

Private sector lender Yes Bank on Monday said it has transferred stressed assets of ₹48,000 crore to JC Flowers Asset Reconstruction Pvt Ltd, a move that will wipe the bank’s book clean of dud assets.  

This pool of stressed assets comprises non-performing exposures and technical write-offs. As per Yes Bank, it is by far the single largest transaction of sale of non-performing assets in the Indian banking system. The bank said it is confident that JC Flowers ARC will enable unlocking the true potential value of the assets. It said that the transaction also allows the bank to benefit from the recoveries in excess of the current consideration. 

   “Coupled with the recent capital raise, this is yet another strategic milestone in the turnaround journey of Yes Bank. This transaction would further strengthen our balance sheet, allowing the bank to focus fully on growth and profitability as future strategic objectives,” said Prashant Kumar, chief executive, Yes Bank.   

Kumar believes that the JC Flowers ARC platform will serve as a model and will allow other Indian financial institutions to tap and monetize considerable interest of global investors in the distressed credit markets. 

As part of a competitive process conducted by the bank, JC Flowers ARC had submitted a binding bid of ₹11,183 crore, under a 15:85 structure -- 15% cash and 85% security receipts -- for assignment of pool of identified stressed assets as on 31 March. Thereafter, it conducted a Swiss Challenge bidding process, with the bid submitted by JC Flowers ARC as the base bid. Following this, the bank’s board approved the declaration of JC Flowers ARC as the winner of the Swiss Challenge process on 20 September. 

The bank said it had appointed Ernst & Young (EY) as its exclusive transaction and process advisor, and Cyril Amarchand Mangaldas as its legal advisor to this process. 

In July, Kumar had said Yes Bank plans to invest about ₹350 crore for a 20% stake in JC Flowers ARC. He had said that the bank will initially invest for a 9.99% stake in the company and raise it to 20%, subject to regulatory approvals. 

Meanwhile, the lender’s board recently approved the allotment of equity shares and equity share warrants aggregating to ₹8,887 crore through a preferential issue to the funds affiliated with two global private equity investors - Carlyle and Advent International. Subsequent to this, both investors now own 9.99% each of the post-issue paid up share capital of the bank. 

Yes Bank shares on BSE stood at ₹21.4 apiece on Monday, up 0.94% from its previous close.