Global private investment firm JC Flowers & Co will acquire Eight Capital’s entire stake in JC Flowers Asset Reconstruction Company (ARC), at a time when
is set to pick up a 20% equity in the ARC, said two people aware of the development.
Eight Capital, a Ravi Chachra-owned fund that invests in distressed assets, has already sold 22% in the ARC to the US private equity firm for ₹50 crore. JC Flowers will now buy the balance 10% that Eight Capital holds for ₹60 crore, one of the people said.
JC Flowers ARC was a three-way joint venture, with Eight Capital initially having a 35% stake, London-based hedge fund Emso Asset Management with 15% and JC Flowers & Co holding the remaining 50%. After the ARC made a rights issue three months ago, Eight Capital’s stake fell to 32% as the fund did not subscribe to its share.
Chachra, who launched Eight Capital in 2005, confirmed that his fund was selling its entire stake to JC Flowers. The ARC’s chairman and managing director, Rahul Gupta, declined to comment.
Eight Capital decided to exit the ARC in February when Yes Bank was preparing to invite non-binding offers for its distressed portfolio, as reported by ET.
Initially, for a year, Chachra, then the managing director of the ARC, was actively pursuing a deal with Yes Bank for the distressed loans, but following his exit, Gupta played a leading role in closing the deal, a third person said.
On Tuesday, the board of Yes Bank approved the sale of its ₹48,760 crore distressed loan portfolio to JC Flowers ARC after it emerged as the highest bidder at an uncontested Swiss auction that concluded on September 7.
As part of the deal, Yes Bank will acquire a 20% stake in the ARC by infusing ₹350 crore as capital. The bank will sell the loan for ₹11,183 crore under the 15:85 structure. The ARC will pay 15%, or ₹1,677 crore, of the price upfront and issue security receipts for the remaining 85%, payable onthe recovery of loans.
Source: Economic Times