Reliance Nippon Life AMC to side-pocket NCDs of Reliance Capital

International News

Reliance Nippon Life AMC (RNam) has decided to use the side-pocket mechanism to separate its schemes’ exposures to non-convertible debentures (NCDs) of Reliance Capital (RCap) after the latter's long-term rating was downgraded to ‘D’ or default category by CARE Ratings on Friday.
“The debenture trustee for these NCDs has informed CARE (via its email dated September 11, 2019) that RCap has delayed the payment of coupon on these NCDs by one working day and paid the same on September 11, 2019. This constitutes an event of default as per CARE’s default recognition policy,” RNam’s note read.
Reliance Equity Hybrid Fund’s exposure to RCap’s NCDs stood at Rs 34.6 crore (at face value), while Reliance Equity Savings Fund’s exposure to the NCDs stood at Rs 95.7 crore. Fresh subscriptions in these schemes have been suspended for now.
Both the schemes are currently in midst of a 30-day load-free exit window given to investors, which is one of the regulatory provisions before any scheme can use the mechanism.Separate portfolios holding RCap’s NCDs will get immediately carved out after this exit window ends on September 24.RNam said it had received the trustees’ approval to create the separate portfolio.
While subscription and redemption will be suspended in these portfolios, these portfolios will be listed on the exchanges within ten working days of creating of the side-pockets to give an exit option to the unitholders.

In exchange disclosure, RCap has called CARE’s rating action as unjustified, saying that the dues were settled on the next working day and couldn’t be processed on the due date (September 9) on account of technical glitch in bank servers....Read More