Franklin Templeton's debt funds hit, as Essel Infra defaults on NCDs
In a fresh jolt to investors, Franklin Templeton Mutual Fund (MF) has said that Essel Infraprojects (EIL) has defaulted on its non-convertible debentures (NCDs). Four of the fund house's debt schemes that are being wound up had made investments in these NCDs.
Though the fund house has said that the event does not have any impact on the net asset value (NAV) of the scheme, it has not entirely marked down its investments. “These NCDs are currently valued at Rs 92 crore in our portfolios, i.e., at 15 per cent of the maturity value after providing a haircut of 85 per cent,” the fund house said in a statement. The four schemes had a maturity value (including redemption premium) of Rs 616 crore.
“The NCDs are backed by a pledge of listed shares of Zee Entertainment Enterprises (ZEEL), Dish TV India Ltd, unlisted shares of EIL, personal guarantee of (Zee founder) Subhash Chandra and corporate guarantee,” Franklin Templeton said. “This only reflects the realizable value basis the current share cover and does not indicate any reduction or write-off of the amount repayable by EIL,” it said.
While there is no immediate material impact on the investments for unit holders, experts say that there were technical and legal issues involved in selling the underlying collateral, i.e., the pledged shares of ZEEL and its associated entities. “Any share sale will require the approval of the trustees and Kotak Mahindra Bank (the custodian appointed to monetise assets of the schemes that are being wound up ...
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