J.C. Flowers & Co. LLC (J.C. Flowers), a private investment firm dedicated to investing globally in the financial services industry, announced that the J.C. Flowers Asset Reconstruction Company (the ARC) has completed the purchase of a pool of nonperforming assets (NPAs) with a principal balance of 480 billion rupee (approximately $6 billion) from YES BANK, a Mumbai, India based bank.
The portfolio purchase price was 112 billion rupee ($1.4 billion) as of March 2022 adjusted for activity since that date. Post-acquisition, the ARC will act as the manager for the portfolio workout to optimize recoveries, with a number of key personnel having worked on the portfolio at YES BANK. The ARC purchased a 15% vertical slice of the NPAs while YES BANK will retain the rest in the form of security receipts.
The portfolio consists of nonperforming and underperforming large corporate loans with significant real estate and infrastructure assets.
J.C. Flowers also announced it has entered into a strategic partnership with YES BANK in which the bank will purchase up to a 19.99% equity stake in the ARC. The investment will be made in two tranches, the first 9.9% completed as part of this transaction, with the remaining investment to be completed subject to regulatory approval.
“This transaction, which marks the single largest non-performing asset sale ever in India, continues our firm’s tradition and reputation for undertaking the most complex and interesting investments in the financial services industry,” said Chris Flowers, CEO of J.C. Flowers. “When we established our ARC we saw strong opportunities in participating in the workout of India’s non-performing loans, and we look forward to working with the YES BANK team.”
“There has been a lot of interest in India from global investors but very few actual transactions, and we believe our partnership with the J.C. Flowers ARC can serve as a model for other Indian financial institutions to follow,” said Prashant Kumar, CEO of YES BANK. “The turnaround YES BANK has already accomplished in one year has been impressive, but by partnering with one of the world’s premier private investors, we hope to transform completely YES BANK’s balance sheet and restore our position as a leading Indian lender.”
This transaction generated support from several key investors in the J.C. Flowers’ funds. Among the investors is Lingotto, a wholly-owned subsidiary of the diversified holding company EXOR N.V.
KPMG India acted as exclusive financial advisor and Wadia Ghandy and Veritas Legal were the legal advisors to J.C. Flowers on this transaction.
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