Yes Bank approves sale of Rs 48,000 cr stressed loans to JC Flowers ARC

Former RBI Deputy Governor R Gandhi appointed as Yes Bank's non-executive chairman

Private lender Yes Bank said on Tuesday that its board has approved the sale of stressed loans worth Rs 48,000 crore to JC Flowers Asset Reconstruction after receiving no bids to challenge that made by the private equity company.

Consequently, Yes Bank’s board of directors has approved JC Flowers’ declaration as the winner of the Swiss Challenge method that was used for the sale of the stressed assets.

“Pursuant to the earlier decision of the Bank to declare JC Flowers Asset Reconstruction Private Limited as the base bidder for proposed sale of an identified stressed loan portfolio of the Bank aggregating to up to Rs. 48,000 Crores, the Bank had used such a bid of JC Flowers ARC as a base bid to conduct a transparent bidding process on Swiss Challenge basis,” Yes Bank said in a release to exchanges.

The Swiss Challenge method stipulates that the highest bid placed in the first round of an auction is the base price for other bidders before the next round.

According to regulatory norms, the entity which makes the highest bid in the second round of auction is given the asset.

Following the signing of the binding term sheet by Yes Bank with JC Flowers ARC LLC and JC Flowers ARC for a strategic partnership related to the sale of the stressed loan portfolio, the lender’s board has also approved the investment need to buy up to 19.99 per cent equity stake in the private equity firm. The purchase can be made in single or multiple tranches, subject to regulatory approval.

“The Bank will now proceed towards negotiating definitive agreements for the aforesaid,” it said.

In the first quarter of the current financial year, Yes Bank reported an improvement in its asset quality, with gross non-performing assets (NPAs) falling to 13.45 per cent of gross advances as of June 30, 2022 from 15.60 per cent by June-end 2021. Net NPAs or bad loans too came down to 4.17 per cent from 5.78 per cent.

Following the transfer of gross non-performing assets (gross NPAs) — a bulk of which have emanated from corporate loans — YES Bank’s gross NPA ratio would dip below 2 per cent, Yes Bank’s MD, CEO Prashant Kumar had said in July.

Separately, Yes Bank said that the RBI has approved the appointment of former RBI Deputy Governor Rama Subramaniam Gandhi as non-executive (part-time) chairman of the bank for a period of three years effective from Tuesday.

Gandhi, who was a deputy governor with the central bank from 2014 to 2017, is currently an independent director on the boards of several financial sector entities.