Five foreign investors shortlisted for majority stake in Yes Bank-backed ARC

Five foreign investors shortlisted for majority stake in Yes Bank-backed ARC

Five foreign investors have made presentations to the management to form a new joint venture asset reconstruction company (ARC) that will house the lender’s bad loans, three people familiar with the development told ET.

The investors which have made presentations include Los Angeles based $149-billion Ares-SSG Capital, $15-billion alternative investment firm Varde Partners, US based $55-billion Cerberus Capital and distressed asset giants $156-billion Oaktree Capital and private equity company JC Flowers, people familiar with the move said.

Individual investors could not be immediately contacted. Yes Bank did not respond to ET’s query.

Yes Bank will likely hold a minority share in the proposed ARC in line with Reserve Bank of India (RBI) directions. The selected investor is likely to hold a majority as much as 80% to 85% in the new venture, one of the persons said. EY is helping Yes Bank with the process.

“The model is more of a NARC type. Banks are not encouraged to hold a major share in any ARC. That’s why they are selling it,” said a senior executive involved in the matter.

He was referring to the government backed National Asset Reconstruction Co (NARC), which has been formed to resolve legacy bad loans from the banking sector.

“Investors have not yet been officially informed about the short listed firms so the process will take some more before the partner is selected,” said a third person familiar with the matter.

Yes Bank is breaking ranks with the industry in bad loans resolution as it would not sell any default loans to the newly proposed National Asset Reconstruction Company (NARC) as it believes it would be able to recover more than the proposed bad debt aggregator.

The bank has been pursuing its objective of a majority owned asset reconstruction company (ARC) and is waiting for the new set of guidelines from the Reserve Bank of India (RBI), CEO Prashant Kumar told ET on May 2 earlier this year. RBI has refused Yes Bank permission to hold a majority stake in an ARC.

Yes Bank’s gross non-performing assets were at Rs 28,506 crore in the June quarter compared with 32,703 crore a year ago.

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