Sat. Oct 16th, 2021


The man who withdrew $ 2.4 billion from Argentina is now coming after India.

Jay Newman led US hedge fund Elliott Management’s 15-year struggle to force the Argentine government to pay its default. The campaign, which was good in 2016 when the country agreed to settle the claims of ‘held debt’ creditors, is considered one of the largest hedge fund operations.

Now the 69-year-old, who has built a reputation for high-risk betting on unpaid government debt from Latin America to Asia during a career spanning more than four decades on Wall Street, says one case has helped him retire .

Newman was appointed by a group of shareholders of Devas Multimedia, a satellite and telecommunications company involved in a battle with the Indian government. Devas, who was founded by a former Goldman Sachs banker, has allocated about $ 1.3 billion in arbitration awards after a contract he signed with an Indian state-owned company called Antrix to develop broadband was canceled a decade ago. . Interest on the amount due is approximately $ 350,000 per day.

India has refused to pay, claiming that the original competition for the contract was fraudulent, and has started a lawsuit to close Devas, which includes US investment groups Columbia Capital and Telcom Ventures as well as Deutsche Telekom among its shareholders.

India is trying to “penetrate” the dispute, Newman told the Financial Times. “This is contrary to the behavior of Russia and Argentina together,” he said.

India joins forces with Devas, as has its approach to a series of decisions examined by international arbitration panels.

Scottish oil producer Cairn Energy has been trying for months to force the country to pay $ 1.2 billion awarded by a tribunal in a tax evasion, which previously reflected disputes with telecommunications group Vodafone and French drugmaker Sanofi.

There was a breakthrough in August when New Delhi moved waste the retroactive tax that Cairn Energy and Vodafone put in the way, which paved the way for a $ 1 billion repayment in Cairn. India’s revenue secretary Tarun Bajaj said at the time that ‘we want to send a message to investors that the country believes in the stability and security of taxes’.

Newman said the government’s decision to scrap the tax law did not affect Devas and that the group’s shareholders would “continue to enforce our legal rights”.

The size of assets

With little sign that India has paid up in its dispute, Newman says that Devas is magnifying the assets of the Indian government and that he may try to seize them abroad. The threat reflects Elliott’s sensational seizure of an Argentine naval vessel in Ghana in 2012, during a campaign that sets new and controversial precedents for pursuing financial claims against sovereign states.

“People will be amazed at how many assets India has,” Newman said. Assets that are susceptible to seizure “can literally be anything”.

The Indian Parliament building in New Delhi

The Indian Parliament Building in New Delhi. The dispute between Devas Multimedia and India dates back to 2005 © Money Sharma / AFP via Getty

Aircraft owned by Air India may be the following, subject to a court ruling. In June, Devas shareholders filed a lawsuit in the southern district of New York to try to establish that the state-owned airline is ‘the alter ego’ of India and is therefore also liable, following a similar move by Cairn. A Seattle judge in August ordered Antrix to disclose details of its assets to Devas shareholders.

The wide-ranging dispute between Devas and New Delhi, dating back to 2005, included lawsuits in India, the US, Switzerland, the Netherlands, the United Kingdom and France and rulings by three arbitration panels.

Devas agreed in 2005 to lease Antrix satellite spectrum to develop a broadband network and pay more than $ 300 million, according to a Chennai court report this year.

But in early 2011, after a investigation by the official auditor of India on the alleged underpricing of internet licenses by the Ministry of Space, Antrix in state ownership canceled the contract with Devas, citing force majeure.

According to the application in Chennai, Devas claims that the contract was canceled ‘illegally’ and claims ‘irreparable loss’. It has already paid about $ 130 million for the satellite spectrum, says a person familiar with the matter.

Since then, Devas has won a series of court decisions. In 2015, the International Chamber of Commerce ruled that Antrix had “unlawfully” terminated the contract and ordered to pay it $ 562 million in damages plus $ 100 million in interest upfront. With an extra 18 percent interest rate per year, the grant is worth about $ 1.2 billion. Two further tribunals also ruled in favor of Devas, totaling $ 1.3 billion.

In November, however, the Indian Supreme Court stopped collecting the $ 1.2 billion ICC grant after the attorney general said India had discovered “serious fraud”.

Antrix filed a liquidation petition against Devas earlier this year, claiming that the award of the contract was “fraudulent in fraud and corruption”, and in May the National Company Law Tribunal in India appointed a liquidator for Devas.

“It’s amazing to Antrix how Devas around the world is trying to enforce an outstanding award,” Antrix told the Financial Times. It is said that the original agreement that Devas entered into with the then officials of Antrix was ‘fraudulent’ and that ‘Devas did not have the technical competence to fulfill their obligations under the agreement’.

It added: ‘Antrix is ​​strongly against this movement around the world, where such efforts are being made. Antrix is ​​hopeful to succeed. ”

Matthew McGill, partner at Gibson, Dunn & Crutcher, which represents Devas shareholders, said: “To date, India has failed to substantiate any allegations of fraud against Devas.”

The Ministries of Corporate Affairs and Foreign Affairs of India did not respond to requests for comment.

Vultures

At Elliott, Newman saw an opportunity in Argentina’s enclosed bonds after the country’s default in 2001 on about $ 100 billion in debt. While most creditors accepted penalty restructuring that offered about 30 cents on the dollar, Newman was at the forefront of Elliott’s decision, along with a small group “to hold out” creditors, to fight through the courts.

“What really interests me are the rare cases that show the chronic shortcomings in government that are holding certain countries to their full potential,” says Newman, who wrote a thriller, Underpayment, during a retirement between Florida and the state of New York. ‘In Argentina, it was an absolute contempt to meet loan contracts. In India, it is a complete respect for private enterprises, especially those from abroad. ”

Elliott argued that Argentina should not continue to pay debtors who have accepted the restructuring without also paying the states in full. The American judge, Thomas Griesa, accepted the argument and gave an order to someone helping Argentina to avoid his order to pay the post.

President Cristina Fernández de Kirchner refused to bow, calling the holders ‘vultures’ and ‘financial terrorists’, but in 2016 new president Mauricio Macri agreed to pay $ 4.7 billion, including $ 2.4 billion to Elliott.

Newman doubts that the battle with India will take the 15 years it has taken to resolve the dispute in Argentina, but stressed that ‘you need a strong will’.

“Sometimes it takes time for a sovereign to realize that not all creditors will pitch their tents and disappear,” he said.

laurence.fletcher@ft.com



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