Bank of America successfully bids for Jayaswal Neco via ACRE

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Published: December 19, 2018 12:15:03 AM

BofA has reached out to the RBI seeking easier norms for takeover of stressed assets by foreign banks

BofA successfully bids for Jayaswal Neco via ACRE

Bank of America has put in a successful bid for debt-ridden Jayaswal Neco through Assets Care & Reconstruction Enterprise (Acre), people aware of the development said. The lender is also understood to have reached out to the Reserve Bank of India (RBI) seeking easier norms for takeover of stressed assets by foreign banks. On Tuesday, Jayaswal Neco informed the exchanges that State Bank of India (SBI) has completed the sale of its exposure to Acre.

This is the bid based on which SBI and Punjab National Bank (PNB) had announced Swiss challenge-based auctions for the sale of their exposures to Jayaswal Neco.The sale by SBI resulted in a recovery of 65% of the bank’s `1,363-crore fund-based exposure.

“Bank of America is interested in buying the asset, but given the existing regulations, they could not do it themselves. Their branch offices in India are too small to execute such a deal and they will have to do it through the parent entity. That is why they are talking to the RBI,” a senior banker said.

In a set of guidelines for sale of stressed assets released on September 1, 2016, the RBI allowed banks to sell their non-performing assets (NPAs) to banks, non-banking financial companies (NBFCs) and other financial institutions, in addition to securitisation companies and ARCs.

Emails sent to Bank of America India and the RBI remained unanswered till the time of going to press.

Jayaswal Neco owes its lenders `3,522 crore and was named in the RBI’s second list of large NPAs which were to be resolved under the bankruptcy law, unless resolved by other means, by mid-December 2017. SBI had sought a 100% cash bid for the asset and the reserve price of `886 crore implies it was willing to take a haircut of up to 35% on its fund-based exposure of `1,363 crore.

Besides putting in bids for the fund-based outstanding, other bidders for the asset were also required to furnish a guarantee or a 100% cash margin for SBI’s non-fund-based outstanding worth `171 crore, or the non-fund-based outstanding as on the date of assignment, whichever is higher, subject to a maximum of `219 crore.

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