Reliance Broadcast defaults to debt schemes of Franklin Templeton MF

In a note to investors, FT MF said that it was in the process of initiating appropriate enforcement action to recover dues from the issuer and other connected parties

Two debt schemes of Franklin Templeton Mutual Fund have faced default from Reliance Broadcast, an Anil Ambani group firm, after it was unable to meet maturity and interest payments due on its non-convertible debentures (NCDs).

Franklin Corporate Debt Fund and Franklin Short Term Income Fund had exposure to these NCDs. Of these, the latter is being wound up by Franklin. In a note to investors, the fund house said it was in the process of initiating appropriate enforcement action to recover dues from the issuer and other connected parties.

Maturity of these NCDs was due on July 20. These were secured NCDs and had a ‘put option’ on Reliance Capital. Meanwhile, the wound-up schemes recei­v­ed a further Rs 1,0­05 crore in cash flows during July. Given that the wind-up was announced in April, these sche­m­es have received cash flows of Rs 4,200 crore from maturities, pre-payments, and coupons. Of the six schemes wound up, two have already turned cash-positive. 

Further, borrowing levels have reduced steadily in the Low Duration Fund and Credit Risk Fund. For the former, borrowing has reduced to 1 per cent of assets under management, while it has dro­pped to 4 per cent for the latter. “The cash flows came in despite the inability to monetise assets in an efficient manner. The schemes will endeavour to accelerate monetisation following completion of the e-voting exercise and unitholder meet, which can take place only after completion of the legal process,” stated the note.

Regarding the Securities and Exchange Board of India’s audit of schemes under wind-up, Sanjay Sapre, president of Franklin, said: “Some of you (investors) may have seen certain unsubstantiated rumours and insinuations around audit completion and findings in the media. I would urge you not to be swayed by such reports, which often lack a basis in fact.”