JPMorgan to separate illiquid Amtek paper from its 2 schemes

To seek approval of unit holders

JPMorgan's mutual fund will seek the approval of unit holders of its India Treasury Fund and India Short Term Income Fund to segregate the assets they hold from a single security, Amtek Auto.

Amtek is considered no longer of investment grade and is currently illiquid. The approval is to be sought by a simple majority, through postal ballot

As a result of the proposed segregation, the net asset value of the existing units in the schemes would drop by the value representing the illiquid segregated asset. All unit holders on the date of record would receive proportionate units, to reflect their interest in the value of the segregated asset.

 

Both MF schemes together have an exposure of Rs 200 crore or 6.75 per cent of total assets under management in debt issuances by Amtek. The shares of the company lost 70 per cent on the stock exchanges in August, to a six-year low.

Last month, the asset management company (AMC) had ‘gated’ the redemptions in these two schemes to a percentage limit not exceeding one per cent of the total number of units outstanding on any business day. “We are seeking unit holder approval for a segregation of the illiquid asset which, if effected, can allow for the gating to be lifted, providing unit holders of the schemes with as much liquidity as possible,” went a note issued on Monday by the AMC.

Unit holders will be given a notice of seven clear business days to vote on the proposed segregation of the illiquid asset, with effect from September 28 or another day to be determined by the trustee company.

If the illiquid asset is disposed off or otherwise paid out/realised prior to obtaining the unit holders’ approval, then JPMorgan reserves the absolute right not to undertake the proposed segregation or to modify the proposed segregation or implementation thereof, the note said.

JPMorgan reiterated it would continue to take all steps in pursuing satisfaction of Amtek's obligation under this bond and/or any other means of receiving the cash value for these investments and to the extent the rights under the bonds and applicable law allow. “We continue to assure that all unit holders are treated equally and fairly and all decisions shall be taken in the best interest of the unitholders,” the note said.