Franklin Templeton Mutual Fund in a note to investors on Friday announced a default on debt schemes issued by the Essel Infraprojects Ltd. (EIL) the note added that the fund is evaluating recovery proceedings against the infrastructure arm of Essel Group.
The Essel Group defaulted on a Rs 92 crore maturity obligation of non convertible debentures (NCD).
The NCDs are backed by a pledge of listed shares of Zee Entertainment, Dish Tv, unlisted shares of EIL and personal guarantee of Subhash Chandra and corporate guarantee.
On maturity date of May 22, the issuer was unable to meet the obligation. “These NCDs are currently fairly valued at Rs 92 crore in our portfolio at 15 per cent of maturity value after providing a 85 per cent haircut,” Franklin Templeton said.
The maturity value, including redemption premium, was Rs 616 crore but it is only valued at market value of Rs 92 crore.
“This only reflects the realisable value basis the current share cover and does not indicate any reduction or write-off of the amount repayable by EIL (Essel Infraprojects),” said Franklin Templeton. “The valuation would be monitored daily and the receivable will be adjusted to reflect any material change in the share cover.”
This does not have any impact on the NAV per unit of the schemes in comparison to the NAV of May 21.
“We have appointed a legal counsel and are actively considering all necessary actions to maximize recovery value. The schemes will continuously monitor the developments in EIL and take appropriate steps in the best interests of unitholders,” the fund said.
There are four schemes with exposure to this Essel Infra debt namely, Dynamic Accrual, Credit Risk, Short Term Income Plan and Low Duration.
Essel group which had around Rs 7000 crore to mutual funds has earlier sought a time extension for repayment of loans by selling its group assets and equity in Zee Entertainment.