Re­liance, UTI MFs separate de­fault­ing Altico bonds

The Times of India (New Delhi edition) - - Times Global - TIMES NEWS NET­WORK

Mum­bai: Altico Cap­i­tal In­dia, a real es­tate sec­tor-fo­cused NBFC backed by well­known pri­vate eq­uity funds, has de­faulted, lead­ing to set­backs for two large fund houses. On Fri­day, Re­liance MF and UTI MF said that they were cre­at­ing a ‘seg­re­gated port­fo­lio’ for the debt pa­pers of Altico Cap­i­tal, ag­gre­gat­ing to about Rs 537 crore.

In case a cor­po­rate de­faults on its bonds, Sebi al­lows fund houses to take those bonds out of the scheme’s main port­fo­lio and cre­ate a new folder with only the bonds which are in de­fault. Fund houses can then al­lot units of the seg­re­gated port­fo­lio on a pro-rata ba­sis to unit hold­ers in the orig­i­nal scheme. Once money is paid back by the de­fault­ing com­pany, unit hold­ers are paid back through re­demp­tions.

In this case, Re­liance MF and UTI MF each will separate Altico Cap­i­tal’s bonds from the schemes which cur­rently hold these pa­pers and cre­ate two port­fo­lios.

One will con­tinue to hold all the good pa­pers that’s there in the cur­rent port­fo­lio of the schemes.

The other port­fo­lio, the seg­re­gated one, will have only Altico Cap­i­tal’s bonds in it and all the unit hold­ers of the orig­i­nal scheme will also get units of the seg­re­gated port­fo­lio. The NAVs of the two port­fo­lios will also change ac­cord­ingly.

The Altico Cap de­fault came just when the fund in­dus­try was get­ting some respite from the debt mar­ket cri­sis af­ter Es­sel Group and DHFL part-paid their loans which were ei­ther de­layed or were on de­fault.

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