Private sector lender Yes Bank has chosen JC Flowers Asset Reconstruction Company (ARC) as its joint venture partner to sell about Rs 51,000 crore of bad loans in a bid to improve its valuation and help woo equity investors.

Worth mentioning here is that a successful sale of distressed loans is vital for the revival of Yes Bank, which has been exploring options to raise funds to shore up its balance sheet.

Citing people familiar with the matter, ET reported that Yes Bank invited bids for its bad loans portfolio, nearly Rs 51,000 crore, soon after the Reserve Bank of India in March 2021 discarded its proposal to set up an ARC as its subsidiary.

If the transactions see the light of day, it would be India’s largest distressed asset sale and will aid Yes Bank becoming nearly a zero non-performing asset (NPA) bank, making it easier for the bank to attract capital.

Last week, the private sector lender announced JC Flowers ARC as the highest bidder with Cerberus Assets Management, one of the largest distressed assets investors, coming a close second.

JC Flowers offered Rs 12,000 crore while Cerberus gave a slightly lower offer, the business daily mentioned, citing sources

In March 2020, Yes Bank was bailed out after State Bank of India (SBI) and some private sector lenders made a Rs 10,000-crore capital infusion to keep it afloat

According to sources, the bank will soon conduct a Swiss challenge auction wherein it would invite counter bids with JC Flowers ARC’s offer as an anchor bid. If the bank gets a higher offer, JC Flowers will have the right to match it.

Of JC Flowers ARC’s Rs 12,000 crore offer, 15 per cent will be paid upfront in cash while the remaining amount would be in the form of security receipts to be redeemed as the ARC claims money from defaulting borrowers.