Voting ‘against’ closure of 6 schemes will not impact decision, Franklin tells investors

Suresh P Iyengar Mumbai | Updated on May 15, 2020

‘But will slow down the process of repaying investors’

Franklin Templeton has clarified that the decision to close the six debt funds will not be reversed even if investors vote ‘against’ the proposal.

The fund house is in the process of sending email notices to seek investors’ approval for winding up the six schemes.

In a letter to investors, Sanjay Sapre, President, Franklin Templeton Asset Management (India), said some investors believe that by voting in the ‘negative’, the winding-up process will be reversed and that the six schemes will recommence the redemption and subscription process.

“This is not true. The purpose of the vote is to authorise the trustees to take the next steps for disposal of the assets of the scheme and distribution of the proceeds to the unit holders in accordance with regulations,” he said.

If the trustees do not receive authorisation to proceed with the disposal of assets of the scheme, this may delay the process of monetising such assets and distribution of proceeds.

Therefore, he urged investors not to base their choice on market speculation and rumours.

According to SEBI regulation, if majority of investors vote ‘negative’ for the winding up notice, the trustees have to appoint a third-party liquidator to sell the assets and repay the investors, said a market expert.

Last month, the troubled fund house had abruptly closed six of its debt schemes, leaving investors in the lurch.

Sapre said the six schemes continue to receive inflows regularly and other commitments have been received as per schedule thus far. There has been a marked reduction in borrowing levels in the six funds under winding up, as it receives the cash flows via coupons, scheduled maturities and prepayments, said Sapre.

On investment with longer maturity of up to four years, he said, the schemes will explore all opportunities to monetise the underlying assets before the maturity date, without resorting to distress sales, so as to return investor money early.

“It will be the endeavour of the schemes to return the money in advance of the maturity dates of the underlying securities,” he said.

Allying investors’ concern on whether repaying debt will impact their returns, he said the borrowings in the schemes have already been adjusted while determining the assets under management (AUM).

Published on May 15, 2020

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