Aditya Birla Sun Life Mutual Fund recently communicated with its investors that it has formed a segregated portfolio in its three schemes- ABSL Medium Term Plan, ABSL Credit Risk Fund, and ABSL Dynamic Bond Fund.
The AMC had bought roughly Rs.800 crore of NCDs of Adilink Infra & Multitrading Private Limited which were due in March 2020. The fund house owns 98.65% of the debentures and minority investor own remaining 1.35%.
After the company failed to make payments to the minority shareholders, the fund house side pocketed to segregate its stressed assets, those having exposure to Essel Group company.
The company in a note to investors said that “On 25th Nov 2019, payments from Adilink were due to the minority investor as the minority investor had exercised a put option available to them. It has come to our knowledge that the Issuer has not repaid the minority investor today. We have taken this as a credit event and propose to create segregated portfolios for Adilink exposure.”
SEBI permits AMCs to create a segregated portfolio of debt and money market instruments of mutual fund schemes in order to ensure fair treatment to all investors in case of a credit event and to deal with liquidity risk.
It consists of two funds, one with risky assets where fund house will not allow redemption expecting recovery from stressed assets and another fund with other assets with existing features.
The fund house expects the repayment of NCDs through the monetization of road assets which are pledged with them as security
Talking about the resolution of the NCDs the AMC said that, “Given that these are unlisted infrastructure assets, the sale process is a little longer drawn owing to negotiation & finalization of all commercials, documentation as well as authority approvals.” The AMC said that it has started the process of monetizing these road assets and was working to realize dues at the earliest.
