A source familiar with the matter said that Indian lender Yes Bank is likely to agree to transfer onerous assets of 480 billion rupees ($6 billion) to private equity firm GC Flowers at its upcoming board meeting.
Two sources said a rival consortium led by private equity firm Cerberus and Indian Asset Reconstruction Corporation withdrew its bid after submitting an expression of interest earlier this year.
“We evaluated the loan accounts carefully and realized there were so many scam accounts and other problematic accounts that recovery was a challenge,” said the second source.
JC Flowers has made an initial offer of Rs 111.83 crore for a fully stressed loan portfolio of Rs 480 crore. The sources said the Cerberus-Arcel consortium was supposed to submit a competing bid by Sept. 7, but they withdrew.
“Once the board approves GC Flowers’ offer, it will take about a month to complete the paperwork and transfer of assets,” the first source said.
Yes Bank, JC Flowers, Cerberus, and ARCIL did not immediately respond to an email request for comment.
Lender Yes Bank believes its total bad loans could fall to 2% from 13.4% in the June quarter after transferring the bad loans to the new asset rebuilding company, it said earlier.
The bank had already set aside more than 80% of the total loan amount which will now be transferred to JC Flowers.
Moving stressed loans off its ledger is a crucial step for Yes Bank and comes more than two years after the central bank was forced to step in to take control of the bank after a surge in toxic assets alarmed investors and depositors, causing concern among investors and depositors. Systemic risks to the banking sector in India.
The lender raised $1.1 billion in capital by selling up to 10% of its shares to The Carlyle Group and Advent International in August. Capital Trust has also helped its stock surge nearly 40% since June 30.
(dollar = 79.5925 Indian rupees)