How Yes Bank Closed The Largest-Ever Stressed Asset Portfolio Sale In India

Two years in the making, private lender Yes Bank Ltd.’s plan to offload its bad loans to a separate entity is finally coming to fruition.

The bank’s board, on Tuesday, cleared the sale of Rs 48,000 crore worth of bad loans to JC Flowers Asset Reconstruction Co., marking India’s largest sale of non-performing assets by a single bank, yet.

According to details provided by the bank, JC Flowers had submitted a bid of Rs 11,183 crore for the entire pool of stressed assets, assuring a recovery of around 23% to the bank.

The sale will be conducted under the 15-85 structure—15% of the bid value will be paid in cash upfront, while security receipts will be issued for the rest. The receipts will be redeemed later, in part or full, depending upon the amount of recovery achieved by the ARC.

While JC Flowers had been identified as the base bidder in July 2022, the bank was required to conduct a Swiss Challenge auction, allowing others to outbid it. A consortium of Cerberus and Asset Reconstruction Company of India Ltd. did try to mount a bid, but pulled out of the race at the last minute, leaving JC Flowers as the sole bidder.

Once the sale is concluded, Yes Bank is also looking to buy 19.99% stake in JC Flowers ARC, which will allow the lender to participate in any upside on the recovery of these bad loans. The bank will need a final approval from the Reserve Bank of India for that.

The sale will not only wipe out Yes Bank’s legacy stressed-asset problem, but will also pave the way for an equity fundraise from the Carlyle Group and Advent International. The private bank will raise $1.1 billion in total from these two investors in exchange for 10% equity stake each, it had previously said.

But this journey has not been easy for Yes Bank, to say the least. From finding the right buyer, to infighting among a bidder consortium, a prolonged negotiation process and regulatory hurdles, the bank has seen it all.

Yes Bank and JC Flowers did not immediately respond to queries mailed on Wednesday.