collapseof jp morgan's amtek auto debt schemes

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COLLAPSE OF JP MORGAN'S AMTEK AUTO DEBT SCHEMESMyValueTrade


CONTENTS SLIDES

Amtek Auto 3 - 4

JP Morgan Chase 5

Amtek & JP Morgan 6 - 8

Amtek Auto Default 9

Impact on JP Morgan 10 - 11

Impact on Asset Management Industry 12

About MyValueTrade 13 - 15


Amtek Auto Ltd., incorporated in the year 1988, is a Small Cap company (having a market cap of Rs 949.59 Cr.) operating in Auto Ancillaries sector.

Amtek Auto Ltd. key Products/Revenue Segments include Auto Components which contributed Rs 3704.61 Cr to Sales Value (93.77% of Total Sales), Other Services which contributed Rs 246.07 Cr to Sales Value (6.22% of Total Sales), for the year ending 30-Sep-2014.

For the quarter ended 30-Jun-2015, the company has reported a Standalone sales of Rs. 854.22 Cr., down -5.93% from last quarter Sales of Rs. 908.09 Cr. and down -12.73% from last year same quarter Sales of Rs. 978.80 Cr. Company has reported net profit after tax of Rs. -157.60 Cr. in latest quarter.

AMTEK AUTO LTD.


Amtek Auto released two commercial papers to raise short term liquidity. Both papers were given a credit rating AA-* by CARE [Credit analysis and research]

*The evaluation made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default. AA- is a high grade rating description

https://en.wikipedia.org/wiki/Credit_rating_agency

https://en.wikipedia.org/wiki/Default_(finance)


JP Morgan ChaseIn 2002, JPMorgan Chase established its Global Service Center in Mumbai, providing 24x7 middle- and back-office support for every line of business at JPMorgan Chase.

In recent years, J.P. Morgan launched commercial banking in India in 2007; in the same year, J.P. Morgan Asset Management in India received a license to sell to retail investors in the country and launched its first mutual fund, the J.P. Morgan India Equity Fund.

Since 2008, through the financial crisis, J.P. Morgan has helped raise more than US$20bn for Indian corporates through domestic and international offerings.


AMTEK AUTO & JP MORGAN JP Morgan bought Amtek Auto papers forming two debt schemes

JP Morgan India Treasury Fund JP Morgan Short term Income Fund

JP Morgans total exposure to Amtek is 200 crores. Portfolio holdings of JP Morgan as of end July shows 15.4% of

India short term income fund (430 cr) & 5.3% of India Treasury Fund (2,534 cr) was invested in Amtek Auto


Mid-August, Amtek reported temporary cashflow mismatch. 39% share price drop on a single day. The auto components company's stock lost 67% in 3 weeks. Short term income fund's NAV slid by 3.4% India treasury fund's NAV slid by 1.7% Credibilty rating of the Amtek bonds was slashed was slashed from

“BRW A+” to “BRW C” by Brickwork Ratings. The reference price of the bond held by the two JPMorgan schemes

was reduced to 75% by the valuation agencies CRISIL & ICRA. JP Morgan restricted redemption of its two Amtek Auto debt schemes. Withdrawals have been limited to a percentage limit not exceeding one

per cent of the total number of units outstanding on any business day.


Amtek Auto DefaultAmtek Auto defaulted payment in September 2015 on the 2 bonds

held by JP Morgan. Amtek defaulted on a total bond payments of 800cr. Credibility rating of the Amtek Bonds was further slashed. Amtek may stand out among the biggest corporate bond

defaults in years as its acquisition binge squeezed its cash flows.

Amtek to initiate sale of it assets to create cash flow, and also talks are being held with many banks to arrange repayments outstanding matured bonds and soon-to-be matured bonds.

On a relative front, one of Amtek Auto subsidiary – Castex Technologies is under investigation for possible manupulation of its share prices.


Impact of on JP Morgan JP Morgan is seeking approval from unit holders for

segregation of assets in two of its debt mutual fund schemes namely JP Morgan India Short Term Income Fund and JP Morgan India treasury Fund.

NAV of the existing units in the schemes would drop by the value representing the illiquid segregated asset and all unitholders on the record date will receive proportionate units to reflect their interest in the value of the segregated asset.

End August, JP Morgan had allowed 3 of its corporates to exit schemes by making 80cr available while 5 of its other large corporates had 300cr outstanding.

Unhappy corporates are considering legal action against JP Morgan.


Impact on Asset Management Portfolio Companies issuing corporate papers below AAA rating will be

most affected as investors will be wary of short term debt schemes in future.

SEBI has got a number of MF houses and listed companies on its scanner.

SEBI has issued directiveto keep trustees updated on quality of debt investments and their subsequent decrease in credit ratings.

Rationale for initiating investment in corporate bonds to be explained in detail.


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collapseof jp morgan's amtek auto debt schemes

Economy & Finance