InvestorQ : Has Templeton been able to decide how much haircut the debt fund investors in the 6 schemes that were shut in Apr-20 will have to take?
Archita Jajjoo made post

Has Templeton been able to decide how much haircut the debt fund investors in the 6 schemes that were shut in Apr-20 will have to take?

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ishika Banerjee answered.
1 month ago
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Franklin Templeton Mutual Fund has now confirmed that the 6 debt fund schemes that were shut down in April last year, have collected Rs.15,272 crore from maturities, coupons and pre-payments since it closed fresh purchases and redemptions in April 2020. This is a mix of flows and in some cases, there have also been corporate issuers who managed to prepay the loans at the behest of the fund.

It would be recollected that on 23-April 2020, the Franklin Templeton mutual fund had to shut down 6 of its debt fund schemes owing to redemption pressures and lack of liquidity in the bond market. These debt funds related either to credit risk funds or to short term and medium-term duration funds. In all the cases, the assets had been invested in illiquid assets and hence the fund found it difficult to meet redemption pressures.

The 6 funds where Templeton had frozen fresh purchases and redemptions back then had combined AUM among them of Rs.25,000 crore. However, this the AUM that excludes the coupons that should have flowed subsequently. As of March 2021, only five schemes are cash positive and the sixth scheme is still cash-negative. A fund is considered to be cash positive if it has repaid borrowings. It has nothing to be being profitable.

The court had appointed SBI Funds Management as the official liquidator of the 6 debt fund schemes of Templeton. It is currently in the process of liquidating the relevant assets and distributing proceeds to unitholders. There are also simultaneous investigations being conducted by the ED under PMLA. It is also being investigated if KMPs had taken out funds ahead of the closure. Cash available in the troubled schemes stands at Rs.1370 crore.

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