J.P Morgan Asset Management Company (AMC) has received the approval from majority of their unitholders to segregate illiquid assets from J.P Morgan India Treasury Fund and J.P Morgan India Short Term Income Fund. The split will allow investors to redeem liquid units from both the schemes.
The vote was announced by J.P Morgan AMC on September 14, seeking the approval of unit holders of both the schemes to segregate the illiquid assets from the schemes. The split was announced in both the schemes, after investments into Amtek Auto Ltd went bad. As investors started pulling out their money, J.P. Morgan had capped the redemptions at one percent of the total outstanding units on both the schemes, on Aug 28.
According to the notice on the J.P. Morgan AMC’s website, 98.98% of the valid votes were received from the unit holders of JP Morgan India Treasury Fund and 98.69% of votes received from unit holders of JP Morgan Short Term Income Fund to the proposal to segregate the assets of these two schemes.
After the proposed segregation, one set of units will have investments made in Amtek Auto Ltd, while other set of units will contain all other investments and cash holding. “The Unit Holders of the respective schemes are hereby informed that, for the implementation of the Proposed Segregation, the Segregation Effective Date will be September 28, 2015 and the Record Time will be 9 a.m. (IST) on September 28, 2015,” the notice showed.
Both the schemes have an exposure to a Secured Redeemable Non-Convertible Debenture issued by Amtek Auto Limited, which is currently illiquid in the market owing to credit concerns of the issuer. On August 27, 2015, the credit rating of Amtek’s previously rated other non-convertible debentures was downgraded from “BWR A+” to “BWR C” by Brickwork Ratings. Immediately thereafter, the reference price of the bond held by the two JPMorgan schemes was reduced to 75% by the valuation agencies CRISIL and ICRA. This change in price was reflected in each scheme’s NAV on August 28 and subsequently the two schemes received an unexpectedly high level of redemption requests.