Investment firm Eight Capital has decided to terminate its partnership with New York-headquartered private equity firm JC Flowers Group and London-headquartered Emso Asset Management. Together, the three had formed a joint venture firm, JC Flowers ARC, which had bid to buy Yes Bank’s bad loans valued at over Rs 54,000 crore. Although information is now being received, Eight Capital did not agree on the valuation of bad loans, due to which it has decided to distance itself from this partnership.
Eight Capital, which held a 35 per cent stake in Mumbai-headquartered JC Flowers Asset Reconstruction Company (JC Flowers ARC), has decided to sell its entire stake in the firm. While JC Flowers holds 50 per cent stake in the firm and Amso Asset Management holds 15 per cent.
Following the decision to exit Eight Capital, its chairman and managing partner Ravi Chachra has also resigned from his position as CEO of JC Flowers ARC. Mumbai-headquartered Eight Capital will sell its stake to an outside buyer. In addition, it will also transfer its two seats on the company’s board to the new buyer.
Livemint in a report quoted sources as saying, “JC Flowers and At Capital had a difference of opinion over the proposed transaction of Yes Bank and the valuation of the bank’s NPAs. Due to this, At Capital decided to divest itself from the JV. The decision has been taken.”
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The report further said, “Furthermore, there was a difference of opinion on the overall strategy of the company’s India business. While Eight Capital wanted to invest in one place at a time, JC Flower was in trouble with many properties. I wanted to start through a whole line of investments in
Let us inform that 4 potential buyers were shortlisted to buy the bad loan of Yes Bank, one of which was JC Flowers ARC. Withdrawal of JC Flowers ARC may delay Yes Bank’s plan to sell bad loans. Selling off bad loans is crucial for Yes Bank to meet its financial objectives.
A person familiar with the matter said, “The bank believes that the value of these bad loans today may be much higher as the value of the properties backing these loans has seen a revival in the past one year. The value of such properties has definitely gone up as compared to 2019.”
He said that Yes Bank is looking at a valuation of at least 15,000-20,000 crores for its ARCs and may announce the winner of the bid by the end of the month.
Another person from the matter said, “Yes Bank is looking at a higher than average valuation for ARC. It believes that the quantum of assets is much higher than any other bad loan asset deal in the ARC segment. You don’t get such a huge asset in one go. Also, most of the NPAs are accompanied by mortgaged assets whose values have improved significantly. This has made the offer more attractive. Second, in the proposed ARC, Yes Bank has There will be 20% equity, which means the bank will also have a role to play in its decisions.Thirdly, a team of experts from the stressed assets team of Yes Bank will be involved in the proposed ARC, to provide further assistance in terms of recovery of funds could.”
Other shortlisted bidders include global alternative investment management firm Oaktree Capital Management and private equity firm Cerberus Capital Management. EY is advising Yes Bank in this process.
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