Franklin Templeton debt funds see further dip in NAV as Future Group defaults

Four of the six debt schemes of Franklin Templeton Mutual fund which are under winding up saw further dip in their Net Asset Values (NAVs) due to default in payment of dues by the Future Group firms – Nufutre Digital (NDIL) and Future Ideas (FCIL).

Of the six schemes that are under wind-up, four are exposed to NDIL, FCIL, and Rivaaz Trade Ventures (RTVPL).  While Rivaaz Trade Ventures met its payment obligation due on July 31, the other two were unable to make payment.

On July 29, the rating agency Brickwork ratings downgraded the rating of these NCDs to BWR BB+  on account of the downgrade in credit profile of the credit enhancer Future Retail Limited, on which these companies rely significantly for income.

Franklin Templeton in a note said that due to default in payment, the securities of FICL and NDIL will be valued at zero basis on AMFI standard haircut matrix, and the interest accrued and due will be fully provided.

Future Group saw lower sales as a result of the closure of majority of its outlets owing to the Covid-19 induced lockdown which led to reduced liquidity. This resulted in missed coupon payment of a US$ 500 million bond on July 22 and availing grace period of one month for payment.