Reliance Nippon Life Asset Management Company (AMC) has given more time to Reliance Home Finance (RHFL) to fulfill its principal payment obligations after the latter was only able to make the interest payment on Friday, when some of the company's non-convertible debentures (NCDs) matured.
The move comes in wake of the Securities and Exchange Board of India's (Sebi) chairman Ajay Tyagi taking adverse view of 'standstill' agreements between promoters and mutual funds (MFs) at its recent board meeting. According to sources, the regulator could probe whether the best-interests of unit-holders were kept in mind when giving such an extension.
According to people in the know, the fund house has got additional security cover from the housing finance company (HFC) and has also got the coupon rate for the remaining payments increased to 14 per cent (earlier the instrument's coupon was pegged at 9 per cent). "Both the quality and quantum of the cover have been increased," said a person aware of the development. Earlier, the security cover provided by the HFC was 1.1-times of the standard receivables, which is a standard practice in case of non-banking financial companies, industry sources said.
"RHFL has paid interest that was due, and the maturity of the said instrument has been extended to October 31, 2019, with additional cover and coupon," the fund house said in a note.
Meanwhile, Reliance Nippon Life AMC took additional markdown on its exposures to RHFL in-line with regulatory guidelines after extension of the NCDs. From 55 per cent, the markdown has been increased to 75 per cent. The markdown will impact 19 schemes belonging to the fund house, including -- Reliance Ultra Short, Credit Risk and Strategic Debt -- which were exposed to the maturing NCDs.
The impact will be in the range of 0.5 per cent to 2 per cent, depending upon each schemes' exposure levels to RHFL's debt papers, according to the note.
"These instruments were earlier marked down, being rated ‘C’. In line with the latest development and regulatory guidelines, we have further marked down the securities issued by RHFL," the fund house said in its note.
Overall MF industry's exposure to RHFL's debt is estimated to be around Rs 800 crore as of May 31, 2019. Half of this is accounted by Reliance Nippon Life AMC's exposures. According to industry sources, only Reliance Nippon Life AMC had exposure to the NCDs that were supposed to mature on Friday and repay the principal.
In its exchange disclosure, RHFL said, "The extension of maturity has been made purely to address timing mismatches in receipt of proceeds from the ongoing monetisation of retail asset pools of the company. RHFL has already monetised over Rs. 5,000 crore of retail assets, and will continue to do so to meet its debt servicing obligations."
Further, the company pointed out that the current market conditions have frozen fresh lending to private sector companies sine the past nine months.
In April, Care Ratings downgraded Rs 17,300 crore worth of various debt instruments and facilities of RHFL. The company called these downgrades untimely and uncalled for and said that there was no adverse change in company's operational parameters from last rating action. The long-term debt programme of the company was downgraded to 'D' or default grade, while others were downgraded to 'C'.
The Anil Ambani group's financial arm -- Reliance Capital (RCap) -- is a co-sponsorer in the AMC and also the parent company of RHFL. However, RCap is expected to soon complete its 42.8 per cent stake sale to its Japanese joint venture partner Nippon Life as part of its asset monetisation plans.
No comments:
Post a Comment