Cerberus Capital Management, L.P. has emerged as the top bidder to acquire around INR 550,000 million of bad loans from Yes Bank Limited (NSEI:YESBANK), with plans to transfer the assets to a jointly sponsored asset reconstruction company, said two people directly aware of the development. Cerberus is also likely to acquire a controlling stake in Blackstone's International Asset Reconstruction Company Private Limited (IARC), which will be the investment vehicle for the transaction, the people cited above said on condition of anonymity. The development comes after Cerberus shelved its plan to apply for a licence from the Reserve Bank of India for acquiring a majority stake in an ARC Yes Bank wanted to set up.

"Instead, the firm is looking to acquire an existing ARC business to invest in Yes Bank's bad loans," said one of the people cited above. "Being a majority investor, Cerberus will have to apply for a new ARC licence, but seeking a fresh licence from RBI is a time-consuming process. For instance, Adani group's application for setting up an ARC has been pending with RBI for the past two years," said the second person.

J.C. Flowers & Co. LLC has also submitted a competing binding bid to buy a majority stake in Yes Bank's proposed ARC. The asset sale will be conducted via a Swiss auction where other interested parties will also be invited to bid for the assets and match the highest offer.

The sale of assets will take place as per a 15:85 structure, with 15% of the transaction value to be paid upfront and the rest in the form of security receipts to be redeemed, depending on recovery by the ARC. The proposed transaction will mark Cerberus's entry into the ARC business. Emails to Cerberus, IARC and Yes Bank went unanswered.