Franklin Templeton Mutual Fund has informed its investors that Essel Infraprojects Ltd (EIL) has defaulted on two zero-coupon bonds against which four of its schemes have an exposure.
In a note to investors on Friday, Franklin Templeton said that while the bonds had a maturity value of Rs 616 crore, they were at present valued at Rs 92 crore by the fund house.
Franklin Templeton has now appointed a legal counsel and the note said that it is considering all necessary actions to maximise recovery.
According to the fund house, the paper is backed by pledge of listed shares of Zee Entertainment Enterprises, Dish TV, unlisted shares of EIL, personal guarantee of Subhash Chandra and corporate guarantee.
The four schemes that invested in the non-convertible debentures (NCDs) of EIL were — Franklin India Short Term Income Plan, Franklin India Dynamic Accrual Fund, Franklin India Low Duration Fund and Franklin India Credit Risk Fund.
Incidentally, these schemes are among the six that were wound up by Franklin Templeton in April because of redemption pressures and lack of liquidity in the bond markets because of the coronavirus pandemic.
These schemes had invested in Essel Infra Series I 22 May 2020 and Essel Infra Series II May 22 2020 NCDs.
“At maturity, the issuer was unable to meet the maturity obligation,” Franklin Templeton said in the note.
The NCDs were “fair valued” at Rs 92 crore in its portfolios at 15 per cent of the maturity value after providing a haircut of 85 per cent.
The event does not have any impact on the net asset value per unit of the schemes.