Franklin Templeton urges investors to vote for winding up of 6 schemes

In a letter to the investors, Franklin Templeton Asset Management (India) Pvt. Ltd President Sanjay Sapre said that the company will issue notice for seeking consent of unit-holders shortly and consent will be sought from the unit-holders for each scheme separately.

"We seek your consent for the orderly winding-up and believe this will result in the best possible outcomes for unit-holders under the current circumstances. In normal market conditions, the opportunity to liquidate assets at fair value will increase with time," he said.

Sapre said that a vote of "yes" in favour of the orderly winding-up will allow the fund house to proceed with the next step which is seeking unit-holder authorisation under Regulation 41. Post this, the Trustee or any other authorised person can proceed with monetisation of assets and distribution of monies to unit-holders.

This will also mean that the schemes will not be required to make a distress sale of portfolio securities to fund redemptions, he said in the letter.

A vote of "no" against the orderly winding-up would mean the funds will be required to re-open for purchases and redemptions.

"The schemes may suffer significant losses due to the need to sell securities at distress prices to fund heightened redemption volumes," Sapre told the investors.

He noted that from April 24 to November 27, 2020, the schemes under winding up have received over Rs 11,576 crore from maturities, pre-payments, and coupons. Out of the Rs 11,576 crore, the schemes have received Rs 2,836 crore in the month of November 2020.

He said that four out of the six schemes are already cash positive.

"Even though the schemes could not actively monetise the portfolio, the cash available for disbursement as on November 27, 2020 stands at Rs 7,226 crore for these four schemes, subject to fund running expenses," he said.

"This shows that subject to unforeseen credit events, if any, the securities held in the funds can be liquidated at fair value, if the schemes are allowed to undertake an orderly process of liquidation."