FT MF to appeal to Karnataka HC to allow payouts from cash-positive schemes

Fund house informs investor that two schemes under winding-up have cash surplus after repaying bank borrowings

Franklin Templeton Mutual Fund (MF) will appeal to the Karnataka High Court (HC) in order to distribute cash-positive schemes to unitholders.

In a letter to investors, Sanjay Sapre, president of Franklin MF said: “...Two of the schemes undergoing winding-up have surplus cash and we will take appropriate steps in the interest of the unitholders to enable distribution of the same to them at the earliest.”

“In this regard, we will file an appeal before the Karnataka HC seeking vacation of the stay order issued by the Gujarat HC,” he said.

Two of the six schemes — Franklin India Ultra Short Bond Fund and Franklin India Dynamic Accrual Fund — have repaid their bank borrowings and are cash positive.

The fund house expects the Ultra Short Bond Fund to have in excess of 7 per cent of its assets available to distribute to unitholders by the end of June 2020, and the Dynamic Accrual Fund to have in excess of six per cent of assets available by the same time.

Recovery of dues

On specific debt papers, the fund house is considering various options pertaining to its exposure to Reliance Big Entertainment. The company was unable to meet it's interest payments that were due on June 14.

Five of the six schemes under wind-up had exposure to the company’s debt papers. The fund house is exploring its options, including invoking the pledged shares as well as corporate guarantee and is taking legal advice on the same.“These bonds are held in the portfolio at a marked-down value and the share collateral is adequate to cover this value as on June 22, 2020,” Sapre's letter read.

On Essel Infraprojects, which was unable to meet its maturity-related obligations on May 22, the fund house said it has appointed a legal counsel and has initiated necessary legal actions for recovery. Four of the six schemes being wound-up have investments in these bonds.