I am afraid that some section of the media reporting that investors will receive money around the average maturity of the fund may not really work that way. Reports say, if FT Ultra short is 0.62 years Average Maturity, pay back will be roughly 7-8 months, I doubt! (1/n)
How are investors going to be paid back?
(1) Interest on the debt
(2) Maturities proceedings
(3) Selling debt in the secondary market (2/n)
(1) Interest on the debt
(2) Maturities proceedings
(3) Selling debt in the secondary market (2/n)
(1) Interest income – This is very difficult to calculate & FT should issue this soon but assuming the 10k cr portfolio is earning 10%, interest income will be 1000 cr., roughly. This may have deviation from the actual. (continue)
So for 2020, the Interest income will be roughly 650 crore (8 months). This will not be linear as some payments are monthly, some quarterly, semi annually and annually. (4/n)
(2) Maturities – Roughly 35% of the portfolio is maturing in 2020. So another roughly 3,500 cr.
(3) Selling – This is any ones guess of how much will it be
(4) Negative Cash Balance – FT UL/ST has an outstanding payment to be made of 700 cr. (5/n)
(3) Selling – This is any ones guess of how much will it be
(4) Negative Cash Balance – FT UL/ST has an outstanding payment to be made of 700 cr. (5/n)
This means the cash available for distribution will be 3500 + 650 – 700 = 3450 cr. assuming no selling happens and no default takes place. (6/n)
Now lets talk about the call & put options.
1) Call option is when the issuer calls the bonds back & pays money before the maturity. This is unlikely to happen in today’s scenario
2)Put Option is when FT says I want my money back before the maturity & the company has to pay(7/n)
1) Call option is when the issuer calls the bonds back & pays money before the maturity. This is unlikely to happen in today’s scenario
2)Put Option is when FT says I want my money back before the maturity & the company has to pay(7/n)
After carefully studying the entire portfolio, I could gage that FT has put options on the below
(1) Renew Power – 2.64%
(2) Northern ARC Capital – 2.17%
(3) Hero Solar Energy – 2.12%
(4) Hero wind energy – 2.59%
Total – 9.52% (8/n)
(1) Renew Power – 2.64%
(2) Northern ARC Capital – 2.17%
(3) Hero Solar Energy – 2.12%
(4) Hero wind energy – 2.59%
Total – 9.52% (8/n)
Not considering the below 2 puts
(1) Promont – As the condition of put is illogical
(2) Incred Financial Services as its already maturing in 2020.
So assuming that the entire put of 9.52% is also executed, the total available cash in 2020 will be 3450 + 950 = 4400 cr. (9/10)
(1) Promont – As the condition of put is illogical
(2) Incred Financial Services as its already maturing in 2020.
So assuming that the entire put of 9.52% is also executed, the total available cash in 2020 will be 3450 + 950 = 4400 cr. (9/10)
In my opinion, FT will have to sell close to 50% of the portfolio to close Ultra short term in 7-8 months, which is the average maturity. Calculations may vary slightly as its very complex but the conclusion will be more or less the same.
It is futile to have calculated this and may be way off but I still think the output will be the same
