UTI Mutual Fund To Side-Pocket Rs 44-Crore Exposure To Zee Learn Debt

UTI Mutual Fund proposed to segregate or side-pocket its exposure to Zee Learn Ltd. after debt issued by the education company was downgraded to below the investment grade.

As of July 6, Rs 40.77-crore exposure to Zee Learn accounted for 9% of the assets of UTI Credit Risk scheme, according to the statement by the fund house. UTI Medium-Term fund had 3.02% exposure aggregating Rs 3.4 crore.

UTI AMC will freeze redemptions from the two schemes till it gets approval from trustees to segregate the exposure.

CARE Ratings Ltd. downgraded the Rs 44-crore non-convertible debentures of Zee Learn, due for repayment by July 8, citing non-adherence to the structure, and non-funding of shortfall. The rating action, it said, took into account severe operational cash-flow constraints faced by Zee Learn as a result of government regulations not allowing the company to collect school fee during the lockdown period.

How Side-Pocketing Will Work

• The net asset value of the two schemes as of July 7 would be disclosed after opening of business hours on July 8, according to the statement.
• In the interim, subscriptions and redemptions in the schemes will be suspended till the board of trustees approve segregation of the portfolio.
• The asset manager will enable listing of units of the segregated portfolio on a recognised stock exchange within 10 working days of creation of the segregated portfolio.
• Any recovery from Zee Learn in the segregated portfolio, whether partial or full, will be distributed to investors in proportion to their holdings in the segregated portfolio.