Out of the 12 entities interested in the asset reconstruction company (ARC) proposed by Yes Bank, three have been shortlisted for the process by Yes Bank’s advisory ER. The shortlisted companies include global asset management firm Oaktree Capital Management, Cerberus Capital Management which is a private equity firm specialising in distressed investing and JC Flowers & Co.
Amongst those in the run for Yes Bank’s planned ARC include Brookfield Asset Management, Ares SSG Capital, Varde Partners, CarVal Investors, Avenue Asia Group, Bain Capital’s India Resurgent Fund, Apollo Global Management, Rohatyn Group and Silver Point Capital.
The sources also cited that the reason EY chose the three US-based firms to be Yes Bank’s equity partners is their suggestive plans for the proposed ARC. Reportedly, EY would give priority to firms willing to introduce capital of Rs.1,500 to Rs. 2,000 crores to the ARC.
According to sources, Cerberus Capital Management is currently the frontrunner for the proposal, followed by Oaktree. The final candidate will be selected by Yes Bank’s advisory based on a bidding process and negotiation for terms. After the candidate has been selected, the offer will be presented to Yes Bank’s board for decisive approval.
As planned by Yes Bank, it will enter into a 20:80 per cent partnership with the chosen foreign investor. Being the major stakeholder, the foreign investor will then apply for an ARC licence from the Reserve Bank of India under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
The sources revealed that Yes Bank plans to sell Rs 50,000 crore of its distressed loan portfolio to the ARC on a 15:85 basis, wherein the ARC will pay 15 per cent of the transaction amount as cash and the rest will be covered by issuing security receipts.
Moreover, EY has also named Akash Suri, group president and national head of asset reconstruction and management at Yes Bank, as the CEO candidate for the proposed ARC, subject to the approval of the RBI and the proposed ARC’s board.
