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UTI MF imposes exit load on fresh investments in 5 schemes

Our Bureau Mumbai | Updated on June 07, 2019 Published on June 07, 2019

Also raises markdown on DHFL debt securities to 100% from 75%

UTI Mutual Fund has introduced an exit load on fresh investments in five of its debt schemes affected by the delayed returns from one of its investments in Dewan Housing Finance.

The exit load will be applicable from Friday on fresh investment in UTI Treasury Advantage Fund, UTI Ultra Short Term Fund, UTI Short Term Income Fund, UTI Dynamic Bond Fund and UTI Bond Fund to safeguard the interests of existing investors, said the fund house in a statement.

The exit load will not be applicable on existing investment and has been done to deter speculative action in these funds, it added.

This apart, UTI MF has increased the markdown on DHFL debt securities to 100 per cent from 75 per cent in the schemes which have exposure to DHFL due to high level of uncertainty in the recovery timelines and value.

DHFL had interest and principal payments due to the tune of about ₹1,100 crore to the industry as on June 4 and the company failed to repay on the scheduled date.

According to the standard haircut table for sub-investment grade debt securities, UTI MF had taken a 75 per cent markdown to DHFL debt securities in the schemes that have an exposure to DHFL.

On Wednesday, rating agencies Crisil, ICRA and CARE downgraded DHFL commercial papers (CPs) and non-convertible debentures (NCDs) to junk rating of ‘D’. The rating revision takes into account the recent instance of delay in servicing of obligations with respect to some of the NCDs by DHFL due to prolonged liquidity stress.

Following this, UTI Mutual Fund anticipates that there would be enhanced pressure and legal action on DHFL from all creditors, including exercise of early redemption clause and legal options by various lenders.

This is expected to further delay the recovery efforts of the company in the disposal of its assets in an orderly manner. Furthermore, there is no secondary market for such securities in the current scenario, UTI said.

Published on June 07, 2019
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