InvestorQ : What does it mean now that Supreme Court has allowed SBI MF to distribute the proceeds to the unit holders of Franklin Templeton?
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What does it mean now that Supreme Court has allowed SBI MF to distribute the proceeds to the unit holders of Franklin Templeton?

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Rashi Mehra answered.
2 weeks ago
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It was decided and announced by the Supreme Court that SBI MF would be the nodal agency that would execute and implement the Supreme Court order on distribution of proceeds of the six beleaguered debt funds to the unit holders. In April 2020, Templeton had summarily stopped fresh redemptions in 6 debt funds as a low quality portfolio had made it illiquid and driven redemption pressures.

Earlier this month, the Supreme Court had instructed to immediately disburse Rs.9,122 crore to the unit holders of the six funds on a pro rata basis. SBI MF was to be the coordinating agency for this distribution to ensure that the entire activity was above board and without any favour to specific unit holders.

Now the Supreme Court has given its approval to the mechanism proposed by SBI MF to distribute the corpus of Rs.9,122 crore to unit holders of the 6 debt funds of Franklin Templeton. These 6 funds were shut down in late April 2020. This is as per the court order post the unit holder approval. SEBI has been kept in the loop in framing the mechanism.

The next step is that Templeton will assist SBI MF in disbursing the said cash to unit holders and extend its full cooperation. In its 02-Feb order, Supreme Court had ordered the distribution to be done within 15 days. This move will at least bring a temporary liquidity relief to the unit holders whose money has been stuck in these funds for over 9 months now.

Templeton has confirmed that as on 29-Jan, the 6 schemes had combined cash of Rs.14,391 crore from maturities, pre-payments, and coupons after partly repaying the borrowings. However, we will have to wait for SBI MF to confirm these numbers for it to be really credible. The current sum would still entail a haircut to the total outstanding amount of Rs.26,000 crore, although the final haircut amount is not known. 

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