Yes Bank has finalised a deal to transfer stressed assets worth up to Rs 48,000 crore to JC Flowers Asset Reconstruction (ARC), the lender said on Friday.
“Pursuant to the enabling approval of the board of directors on May 6, 2022 and the final approval from the Board Credit Committee on July 13, 2022, the bank has signed a binding term sheet with JCF ARC and JC Flowers Asset Reconstruction Private Limited (“JC Flowers ARC”) for strategic partnership in relation to sale of identified stressed loans of the bank,” Yes Bank said in a communication to the stock exchanges. The term sheet became effective on Friday.
In line with Reserve Bank of India (RBI) guidelines, Yes Bank intends to run a Swiss challenge auction for the sale of the identified portfolio with JC Flowers ARC’s bid as the base bid.
The deal with JC Flowers ARC marks the culmination of Yes Bank’s long hunt for a strategic partner to tackle its pile of legacy stressed assets. Last year, the Reserve Bank had turned down the bank’s proposal to set up an ARC in which it would be the majority partner.
In August 2021, Yes Bank launched a search for a partner for setting up an ARC. They were looking for a prospective investor who would be a player with experience in the distressed assets space to be the lead partner in the ARC. Ernst & Young ran the search process for the bank.
JC Flowers ARC was set up in May 2015 and has a paid-up capital of Rs 124.95 crore. The ARC had assets under management (AUM) worth Rs 64.47 crore as of March 31, 2021.
The company concluded acquisition of two assets during FY21 with a total acquisition price of Rs 33.40 crore. In FY21, the ARC posted a loss of Rs 78.8 lakh on a revenue of Rs 55.5 lakh.
On June 8, Yes Bank said that it has initiated the process to form a new board as it exits from the reconstruction scheme devised for the rescue of the bank in 2020. The proposal for the constitution of a new board is to be placed before the bank’s shareholders at its 18th annual general meeting (AGM) on Friday.
The process was started on the recommendation from State Bank of India (SBI), the largest shareholder in Yes Bank. SBI has proposed that MD & CEO Prashant Kumar continue in his position for another three years, along with the names of eight new appointees to the board.
For the quarter ended March 2022, Yes Bank reported a net profit of Rs 367 crore in the March quarter of FY22, as against a loss of Rs 3,788 crore a year ago. Its gross non-performing asset (NPA) ratio fell 80 bps sequentially to 13.9% and the net NPA ratio fell by a similar amount to 4.5%. In absolute terms, the value of its gross non-performing exposures stood at Rs 36,479 crore at the end of March 2022, down from Rs 37,551 crore as of December 31, 2021.