ICICI Bank Said to Seek Sale of Stressed Loans to Apollo Venture

  • Apollo, ICICI said to mull asset reconstruction company
  • ICICI would hold about 30 percent stake in proposed ARC

ICICI Bank Ltd. will seek to sell about four of its largest nonperforming loans to an asset-reconstruction company the Indian lender plans to set up as a joint venture with U.S. private equity firm Apollo Global Management LLC, a person with knowledge of the matter said.

India’s largest private bank said Monday that it had signed a memorandum of understanding with Apollo India Credit Opportunity Management LLC “for working together for debt resolution in India, in an effort to revitalize and turn around over-leveraged borrowers.” The e-mailed statement didn’t provide any further details.

Under the MOU’s terms, ICICI and the Apollo unit will consider setting up an asset-reconstruction business, which may be operational in about six months, said the person, who asked not to be identified as the details are private. Besides the delinquent ICICI loans, the reconstruction company will also seek to buy stressed assets from other lenders, the person said.

Indian banks are seeking ways to rid themselves of bad debts, which have risen to a 16-year high nationwide, ahead of a central bank-imposed deadline to clean up their balance sheets by March 31. Last month, Brookfield Asset Management Inc., Canada’s largest alternative asset manager, signed an MOU with State Bank of India to set up a joint venture to invest in stressed assets.

A spokesman for Apollo based in New York didn’t respond to an e-mail seeking comment, while ICICI’s spokesman in Mumbai declined to comment.

ICICI will hold as much as 30 percent of the asset-reconstruction company, with the Apollo unit owning the rest, the person said. Such entities buy bad loans and collateral from lenders and work on recovery by revamping businesses and assets.

The ICICI-Apollo venture will also look at creating a special situations fund and a company that will offer interim management services to stressed businesses taken over by the lenders, the person said.

ICICI’s gross bad loans as a percentage of total advances rose to 5.87 percent in the three months to June 30 from 5.82 percent in the previous quarter, an exchange filing showed last week. The proportion of Indian banks’ stressed assets, which include restructured and soured loans, to total advances reached 11.5 percent as of March 31, Reserve Bank of India data show.

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