Franklin Templeton Mutual Fund has approached at least three global distressed asset buyers – SSG Capital, Varde Partners and Farallon Capital – offering to sell Vodafone Idea’s (Vi) outstanding bonds, people familiar with the matter told ET.
The fund house is said to have already written down the full value of an estimated portfolio of about Rs 1,250 crore of Vi papers before any redemption. The value to those securities became nil after being separated from other financially stable portfolios.
Those papers have been downgraded to the ‘junk’ category but not ‘default’.
To be sure, Vi has been serving interest payments or repayments on those bonds on time without any delay.
About five months ago, local credit rating company CARE cut Vi’s rating to B-, deeper into the junk or high-yield category. It placed it under “credit watch with negative implications”.
Improvement of the overall financial risk profile of the company on a sustained basis could lead to a positive rating action/upgrade, said.
Franklin Templeton, SSG and Farallon did not respond to ET’s queries. Varde Partners declined to comment.
“The fund house has nothing to lose as Vi’s bond portfolio value is zero on its books. If it manages to sell, there will be additional gains,” said one of the persons cited above.
In the past two weeks, revival prospects of India’s only loss-making private telecom carrier have brightened.
Last week, the company said it would opt for converting the interest on spectrum and adjusted gross revenue (AGR) outstanding into equity, which would see the government become the largest shareholder with 35.8% stake. If the conversion goes through, UK-based Vodafone group will hold 28.5% with 17.8% held by Kumarmangalam Birla-owned Aditya Birla group. They currently own 44.39% and 27.66% shares, respectively, in Vi.
However, New Delhi is not expected to be involved in the company’s policy decisions.
The government’s potential stake in cash strapped Vodafone Idea (Vi) is credit positive from an investor’s point of view, indicating that the telco would be in a better position to raise funds, brightening the prospects for its long-term survival.
“We are evaluating proposals of buying Vodafone Idea bonds from the secondary market,” said the India head of a global distressed fund.
Nippon India and UTI are the other two fund houses that currently hold Vi debt securities, valued as per standard parameters published by local rating companies including
and ICRA. Market valuations of the exposures were Rs 47.87 crore and Rs 149.74 crore, respectively, as on December 31, 2021, show data from Value Research.
Vi has already cleared a Rs 1,500-crore instalment toward redemption of bonds early January and will pay the remaining Rs 3,000 crore in three tranches of Rs 2,000 crore, Rs 500 crore and Rs 500 crore through January-February 2022, according to disclosures in its latest annual report.
Vi has raised an estimated Rs 5,000 crore via short-term loans from a clutch of lenders led by State Bank of India and others, ET reported on January 11. It plans to use the proceeds to repay existing debt obligations.
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