JP Morgan AMC sells Amtek Auto debentures

Move comes after more than three months since Amtek Auto episode broke in late August

JP Morgan Asset Management Company (AMC) has managed to sell the debt papers of Amtek Auto to a private equity firm at a 15 per cent loss, according to sources. Following the move, JPMorgan allowed investors to make redemptions. The fund house had de-merged the Amtek Auto exposure into a ‘segregated asset’ and imposed a ban on redemption.

“Notice is hereby given to inform the unit holders of the units — segregated asset that the asset management company has sold the Segregated Asset in full on December 5, 2015 and this has resulted in realisation of the segregated asset, thereby providing liquidity in relation to the segregated asset,” JPMorgan said in a notice to the investors.

Calls to senior officials at Amtek Auto seeking details remained unanswered. However, sources close to the development said the fund house managed to recover 80-85 per cent of its investment.

According to earlier reports, Hong Kong-based private equity  firm SSG Capital Management was in talks with JPMorgan to buy out Amtek Auto’s assets.

JP Morgan AMC through two of its schemes had bought bonds worth Rs 200 crore issued by the New Delhi-based automobile  component maker.

The Amtek issue first resurfaced in August, after a rating agency suspended coverage on the auto component manufacturer’s debt paper.  In September, Amtek Auto had defaulted on repayment due to liquidity issues. The move forced the fund house to initially impose a cap on redemptions, later after unit holders’ approval segregated the toxic assets as separate units.

As the situation stands now, those unit holders holding units of segregated assets in schemes — JP Morgan India Treasury Fund and JP Morgan India Short Term Income Fund — can place redemption requests. Any request received by 3:00 pm on a business day will be honoured the next business day.

The Amtek fiasco had created a crisis of confidence not only among the investors of the two schemes by JPMorgan, but the industry as a whole.