A group of investors led by Sabre Capital Worldwide is set to acquire a 66 per cent stake in the beleaguered Centurion Bank. The bank will get a fresh infusion of Rs 319 crore (Rs 3.19 billion) in two phases.

The investors include BankMuscat, which will pick up a 26 per cent stake. Sabre Capital, promoted by former Standard Chartered Bank CEO Rana Talwar, will have a 2 per cent stake in the bank.

In the first phase, Rs 219 crore (Rs 2.19 billion) will be infused into the bank, of which Rs 156 crore (Rs 1.56 billion) will be by a consortium of banks, private equity partners, financial institutions and high net worth individuals led by Sabre.

The recapitalisation also includes a public-cum-rights issue of Rs 65 crore (Rs 650 million). The proposal will be put through a court scheme under Section 391-394 of the Companies Act.

Talwar, chairman of Sabre Capital, will take over as chairman of the bank. Till then, V Janakiraman, chairman and managing director of the bank, will continue in his position.

"An agreement has been signed between Sabre and the other shareholders,giving them management control," Talwar said.

The existing share capital of Rs 152.47 crore (Rs 1.52 billion) will be brought down to Rs 72.98 crore (Rs 729 million) in the first phase. This will be divided into share capital and reserves. The face value of the bank's shares will be reduced from Rs 10 each to either Re 1 each or Rs 4 a share.

Of the exiting investors, the Asian Development Bank and Keppel Bank will pump in fresh capital. The International Finance Corporation has not yet taken any decision in this regard. The holdings of the existing foreign shareholders will be reduced from 36 per cent to 16.1 per cent.

After the restructuring, original promoter Dev Ahuja's TCFC stake will be reduced from 26 per cent to 5 per cent. This will continue in a trust.

The capital infusion by the investors will be at Rs 4 a share, irrespective of their face value. The rights-cum-public issue will be at Rs 4 a share.

After the issue, the capital of the bank will stand at Rs 292 crore (Rs 2.92 billion), raising the capital adequacy ratio to around 10 per cent.

The second phase, involving capital infusion of Rs 100 crore (Rs 1 billion), is expected to be undertaken after two years.

Sabre will have two board representations, one of them being Sabre managing director Rajiv Maliwal. Bank Muscat, which operates a single branch in the country, will merge its Indian operations with Centurion Bank.

With this, Bank Muscat will contribute around Rs 75 crore (Rs 750 million) of the Rs 129 crore (Rs 1.29 billion) being brought in by Sabre. The existing share capital of Bank Muscat is Rs 50 crore (Rs 500 million).

The participation of Bank Muscat is subject to final approval from the central bank of Muscat.

According to Talwar, several domestic investors, high net worth individuals, foreign institutional investors and private equity funds are interested in the remaining stake of Centurion Bank. Deals will be finalised once the court process starts.

Shares being issued to Sabre will also contain warrants which can be exercised over a three-five year schedule.

"This is like a stock option scheme. Sabre's stake in the bank will increase to 14.9 per cent when these warrants are converted into shares," said Maliwal.

Sabre will have to pay Rs 4 each for these shares, and the outgo for the conversion of warrants will be Rs 78 crore (Rs 780 millionb).

DSP Merrill Lynch was the adviser to Centurion Bank, and Ambit Corporate Finance, KPMG, J Sagar and Associates and Ramamoorthy (former chairman of Corporation Bank) assisted Sabre.