Reliance, UTI MFs separate defaulting Altico bonds
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.