Franklin may have taken a haircut loss on JSPL debt holding

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Mumbai | Published: March 12, 2016 12:11:10 AM

Franklin Templeton Investments (India), which completely exited its exposure to Jindal Steel and Power (JSPL) after downgrading of debt papers of the Naveen Jindal-led group's firm...

Franklin Templeton Investments (India), which completely exited its exposure to Jindal Steel and Power (JSPL) after downgrading of debt papers of the Naveen Jindal-led group’s firm, has reportedly taken haircut loss on the total debt holding of JSPL.

Senior officials in the mutual fund industry said fund houses have sold securities of JSPL at Rs 67.5 per bond against the face value of Rs 100. The securities were to mature in three-five years.

There are reports that Franklin Templeton sold JSPL bonds at 25% loss in February and Thursday’s sale was made at a further 10% loss. This indicates that the fund house sold of debt papers of JSPL at a loss of about 32.5% to its cost of acquisition.

Sources, however, declined to comment on the exact transaction value of the deal and the loss incurred. “While you will appreciate that we will not be able to disclose non-public information including transaction details of individual securities; we have done this in the best interest of our investors and to protect from further downside risk,” said a spokesperson in an e-mail.

Franklin Templeton AMC reduced its exposure to JSPL by about half between January and February, and sold off the remaining exposure to JSPL debt worth of Rs 752.5 crore across various debt schemes.

ICICI Prudential AMC still holds debt papers worth Rs 284 crore across its debt schemes in JSPL, says the data from Value Research.

CRISIL in its latest report downgraded its ratings on JSPL to ‘CRISIL D/CRISIL D’ from ‘CRISIL BB+/CRISIL A4+’; the ratings have been removed from ‘Watch with Negative Implications’.

“The rating downgrade reflects delays by JSPL in payment of interest on its term loans; the delays were due to weakened liquidity. Liquidity deteriorated significantly as the steep fall in steel realisations coincided with high debt repayment obligations. Pressure on liquidity intensified further due to delays in materialisation of asset monetisation plans and refinancing of debt,” the rating agency wrote.

In August last year, JP Morgan Mutual Fund had faced a problem due to its exposure to debt securities of Amtek Auto and had restricted redemption from two of its debt schemes — Short Term Income Fund and India Treasury Fund.

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