MF Investor Alert! ICRA puts 6 mutual fund schemes under watch with negative implications
In the aftermath of the downgrade of the loans and bonds of IL&FS, the woes of the debt mutual fund investors do not seem to be over. In a press release dated 22 January, 2019, ICRA has placed the ratings of six mutual fund schemes under watch with negative implications, driven by their exposure to the SPVs of IL&FS.
The rating action takes into account the deterioration in the credit quality of the underlying investments of these schemes driven by their exposure to special purpose vehicle (SPV) of IL&FS Limited. ICRA notes that above schemes have exposures to IL&FS SPV, namely, Hazaribagh Ranchi Expressway Limited (HREL) or Jharkhand Road Projects Implementation Company Limited (JRPICL) or Jorabat Shillong Expressway Limited (JSEL).
The default risks by various SPVs of IL&FS have increased given the recent communication by their management to trustees expressing to stop future repayments citing their interpretation of an order given by National Company Law Appellate Tribunal (NCLAT) on October 15, 2018. Further, in January 2019, two SPVs of IL&FS demanded a refund of the debt payment executed by them post October 15, 2018 from their trustees. Despite a ring-fenced structure and adequate cash flows to service the debt obligations, the SPVs have asked the trustees to stop debiting the SPVs escrow account towards its future obligations.