Eight Capital terminates joint venture with JC Flowers over differences over Yes Bank ARC offer

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According to the people quoted above, following this, Ravi Chachra, chairman and managing partner of Eight Capital and also CEO of sponsored consortium ARC, resigned.

Eight Capital has also signed an agreement to sell its stake in ARC to an outside buyer and will transfer its two board seats to the acquirer after the sale.

The JC Flowers-led consortium was one of four potential buyers shortlisted by Yes Bank to form an ARC to take over the private bank’s massive non-performing assets (NPAs). JC Flowers has a presence in India with its JC Flowers ARC – a joint venture (JV) with struggling Indian investor Eight Capital and Emso Asset Management, headquartered in London.

“Due to differences of opinion between JC Flowers and Eight Capital last week on Yes Bank’s proposed transaction and the valuation of the bank’s NPAs, the latter has decided to leave the JV and withdraw from the race to acquisition of Yes Bank’s NPAs,” one said. of the people quoted above, adding that there was also a difference of opinion on business strategy in India. “While Eight Capital wanted to make concentrated investments, one at a time, JC Flowers wants to invest in a wide range of distressed deals to start with,” the person said.

“The bank believes that bad debts can fetch a much higher value today, as the assets that back these loans have seen a revival over the past year. Real estate and infrastructure activity has picked up. The value of those assets has certainly increased since 2019 at the end of 2019,” the other person said.

“If a big, deep-pocketed CRA really applies their global expertise, invests the time, and uses the right strategy driven by an experienced team of stressed assets, the assets can definitely achieve decent valuations,” said the first person, who knows well the ongoing process. ARC discussions with potential buyers.

Although there is a base quote indicated by Yes Bank for the sale of assets, the mid-sized lender is looking Valuation of 15,000 to 20,000 crore for ARC and name of buyer will be shortlisted by the end of the month depending on the first person.

“Differences emerged on asset valuation as Eight Capital felt Yes Bank was looking for more than is feasible,” the first person quoted above said.

Global alternative investment management firm Oaktree Capital Management, private equity (PE) fund Cerberus Capital Management and JC Flowers are among four players who have been shortlisted to be Yes Bank’s Proposed ARC Finance Partner . EY is advising Yes Bank on the process.

Responses to development email questions are expected from Eight Capital, JC Flowers and Emso Asset Management.

There were 13 players last year in the race to acquire Yes Bank’s bad debt. Among them, four were shortlisted and the bank had solicited binding offers by January 25, 2022 from private equity investors. Even with a 20% stake in the proposed ARC, the private sector lender wants the right to appoint the chairman and key officials in all departments of the proposed ARC, Mint reported in January.

Brookfield Asset Management, Ares SSG Capital, Varde Partners, CarVal Investors, Avenue Asia Group, India Resurgent Fund, a joint venture between Piramal Enterprises and Bain Capital, CreditApollo Global Management, Rohatyn Group and Silver Point Capital were among the 13 candidates, Mint had reported. September 2nd.

In March 2020, the bank founded by Rana Kapoor was bailed out following a Capital infusion of 10,000 crore from State Bank of India (SBI) and some private lenders. Yes Bank, now backed by the country’s largest lender, had stipulated that an investor must have minimum assets under management (AUM) and globally deployed funds of at least $5 billion.

In August 2020, Yes Bank launched a call for expressions of interest for the creation of the ARC. The Reserve Bank of India had previously rejected Yes Bank’s request to set up an ARC, citing a conflict of interest, Mint reported in March last year.

Following this, the mid-sized private bank tweaked the structure of the proposed ARC bid to hold a minority stake and find more shareholders to overcome the regulatory hurdle. For now, Yes Bank has set up a separate team for NPAs, with around 100 people to handle the most 54,000 crore bad debt book.

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