UTI Mutual Fund has proposed to side-pocket its exposure to Zee Learn (ZLL) after the latter’s debt instruments were downgraded to below-investment grade.
The fund house has a combined exposure of Rs 44.17 crore to the Essel group firm through two schemes — UTI Credit Risk Fund and UTI Medium Term Fund.
UTI Credit Risk Fund had an exposure of 9.24 per cent in the debt securities of Zee Learn, while UTI Medium Term’s exposure was 3.02 per cent of its net assets.
On Tuesday, Care Ratings had downgraded the non-convertible debentures of Zee Learn from AA to B with a negative outlook. The rating agency had said that the current outstanding on the NCDs stands at Rs 44 crore, and the due date is July 8.
The rating agency had said that according to the structure, ZLL was to pay the NCD obligations into the debt service reserve account (DSRA) at least 30 days prior to the due date, and in case of payment shortfall, Zee Entertainment (ZEEL) would pay the balance amount at least 7 days prior to the due date of July 2.
However, due to severe constrains in operational cashflows, ZLL has not funded the DSRA account till date. Care Ratings added that as on July 2, ZEEL also has not funded the account.
In December 2018, Sebi had permitted mutual funds to create segregated portfolios, or side-pocketing, with respect to debt and money market instruments.
