4 shut Franklin schemes hit by defaults again

The net asset value (NAV) of four shuttered schemes of Franklin Templeton Mutual Fund fell by up to 6.32% after Rivaaz Trade Ventures, a Future Group firm, defaulted on its scheduled debt obligations due on August 31. Due to the default, Franklin Templeton will value these securities at zero, on the basis of AMFI standard hair cut matrix.

The NAV of Franklin India Income Opportunities Fund fell 6.32%, Franklin India Short term Income Plan 5.02%, Franklin India Dynamic Accrual 3.02%, and Franklin India Credit Risk Fund 0.33%.

On August 29, Reliance Retail announced acquisition of the retail and wholesale business and logistics and warehousing business of the Future Group, on a slump sale basis, for lumpsum aggregate consideration of Rs 24,713 crores.

In a note to investors, Franklin Templeton said, “based on representations from the Future Group we understand NCDs held by the fund house are proposed to be repaid from proceeds of the transaction. We believe the proposed sale announcement is a positive development for the NCDs held by schemes of FTMF. We are closely tracking developments around the same.”

The proposed slump sale and the scheme of restructuring will be subject to regulatory approvals, including National Company Law Tribunal (NCLT), Stock exchanges, SEBI, Competition Commission of India, and approval from equity shareholders and creditors of the transferor companies and transferee companies.

“The above acquisition is being done as part of the scheme in which Future Group is amalgamating certain companies (listed as well as unlisted) carrying on the aforesaid businesses into Future Enterprises Limited (FEL). After the amalgamation, FEL is expected to conclude the slump sale. Further, FEL is expected to raise Rs 2,800 crores by way of preferential allotment to Reliance Retail through a combination of equity shares and warrants. Reliance Retail will hold ~13.14% in FEL (post-merger),” said the note.

Almost Rs 26,000 crore of investor money is stuck in the six funds. The schemes, which the fund house proposes to wind up, are Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.

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