Cerberus leads race for Yes Bank’s planned ARC
Talks are also on with Oaktree and Emso, which has a tie-up with Eight Capital
MUMBAI: Distressed assets investor Cerberus Capital Management is the frontrunner to become Yes Bank Ltd’s equity partner in the lender’s proposed asset reconstruction company (ARC), two people directly aware of the discussions said.
Negotiations are also underway with Oaktree Capital and London-based hedge fund Emso Asset Management Ltd, which has a tie-up with Eight Capital in India, the people said, requesting anonymity.
“Three bidders have been shortlisted on the basis of a competitive bidding process based on technical and financial criteria, but as things stand, the scale is tilted in favour of Cerberus Capital,” said one of the two people cited above. “However, no final decision has been made, and it is possible that more names can be considered for final evaluation if other bidders come up with better terms.”
Yes Bank aims to reduce the need for setting aside funds to cover potential losses from its loans turning bad by transferring the pool of stressed assets to an ARC, thus freeing up funds for further lending.
In August, Yes Bank invited expressions of interest to set up the asset reconstruction company and hired EY as an adviser.
The bank stipulated that an investor should have minimum assets under management and funds deployed globally of at least $5 billion.
Mint reported on September 2 that the private lender received expressions of interest from a dozen investors for setting up an asset reconstruction company in which it will remain a minority partner.
A request for comment sent to spokespeople for Yes Bank and Cerberus Capital went unanswered at the time of going to press. Eight Capital and Oaktree declined to comment.
It is expected that Yes Bank will be able to transfer some of its bad loans to the newly created
entity subject to the Reserve Bank of India’s (RBI’s) approval.
Asset quality of the bank continues to remain weak, with gross non-performing assets at 15.6% as of June 30. That’s better than the 16.8% it had as of March 31, 2020, but the improvement was mainly driven by write-offs of bad loans.
Most of the private lender’s bad loans are from the corporate sector, which had gross non-performing assets of 27.1% as of June 30, an increase from 26.4% as of March 31, 2020.