Rating agency ICRA has put six debt funds - HDFC Short Term Debt Fund, HDFC Banking and PSU Debt Fund, UTI Banking and PSU Debt Fund, UTI Bond Fund, UTI Dynamic Bond Fund and Aditya Birla Sun Life Short Term Opportunities Fund under its watch list with negative implications due to exposure to special purpose vehicle (SPV) of IL&FS.
This has come due to deterioration in the credit quality of underlying investments of these schemes. ICRA said that these schemes have exposure to IL&FS SPV - Hazaribagh Ranchi Expressway Limited (HREL), Jharkhand Road Projects Implementation Company Limited (JRPICL) and Jorabat Shillong Expressway Limited (JSEL). “The default risks by various SPVs of IL&FS have increased given the recent communication by their management to trustees expressing to stop future repayments citing their interpretation of an order given by National Company Law Appellate Tribunal (NCLAT) on October 15, 2018.
Further, in January 2019, two SPVs of IL&FS demanded a refund of the debt payment executed by them post October 15, 2018 from their trustees. Despite a ring-fenced structure and adequate cash flows to service the debt obligations, the SPVs have asked the trustees to stop debiting the SPVs escrow account towards its future obligations,” said ICRA.
ICRA further said, “In case, of delays in honouring its obligations by SPVs, the ratings for these SPVs are likely to be downgraded, thereby impacting the credit score of the mutual fund schemes having exposure to these SPVs. The ability to rebalance the portfolios for these schemes within a month of rating action will remain a key rating driver. ICRA will continue to monitor the portfolios of these schemes regularly and take appropriate rating action as and when required.”
