Franklin Templeton Mutual Fund on Friday announced a default on debt schemes issued by Essel Infraprojects Ltd (EIL), adding that it is assessing recovery proceedings against the infrastructure arm of Essel Group. EIL defaulted on a Rs 92 crore maturity obligation of non-convertible debentures (NCD).
Franklin Templeton said in a note to investors that the issuer (EIL) was not able to meet the obligation on maturity date of May 22.
"The NCDs are backed by are backed by a pledge of listed shares of Zee Entertainment Enterprises Ltd (ZEEL), Dish TV India Ltd, unlisted shares of EIL, personal guarantee of Subhash Chandra, and corporate guarantee," the Franklin note added.
"At maturity, the issuer was unable to meet the maturity obligation. These NCDs are currently valued at 15% of value after taking an 85% haircut," the note stated.
Meanwhile, it is unclear if the American fund house has tried to sell any of these securities or invoke the personal guarantee of Chandra.
Furthermore, Franklin Templeton stated in the note that it has appointed a legal counsel and is "actively considering all necessary actions to maximise recovery value."
Four of the Franklin's fixed income schemes, namely- Franklin India Dynamic Accrual Fund, Franklin India Credit Risk, Franklin India Short Term Income Plan and Franklin India Low Duration Fund are invested in 0% Essel Infra Series 1 and 0% Essel Infra Series 2, which matured on May 22 (2020).
All four schemes are part of six funds that will be wrapped up by Franklin Templeton. Since the winding up process is on, investors cannot transact on any of these funds. The American fund house has appointed Kotak Mahindra Bank to monitor the winding up process of the 6 schemes it closed on April 23.