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Ex-Elliott sovereign debt supremo gears up for final battle in India

The person who extracted $2.4bn from Argentina is now coming after India.

Jay Newman led US hedge fund Elliott Administration’s 15-year battle to power the Argentine authorities to pay out on its defaulted debt. The marketing campaign, which got here good in 2016 when the nation agreed to settle the claims of “holdout” collectors, is seen as one of many biggest hedge fund trades.

Now, the 69-year-old, who throughout a greater than four-decade profession on Wall Avenue constructed a fame for high-risk bets on defaulted sovereign debt from Latin America to Asia, says that one case has helped entice him out of retirement.

Newman has been employed by a bunch of shareholders of Devas Multimedia, a satellite tv for pc and telecoms firm embroiled in a struggle with the Indian authorities. Based by a former Goldman Sachs banker, Devas was awarded about $1.3bn in arbitration rulings after a contract, which it had with an Indian state-owned firm known as Antrix to develop broadband, was cancelled a decade in the past. Curiosity on the quantity owed is accumulating at about $350,000 per day.

India has refused to pay, alleging the unique competitors for the contract was mired in fraud, and has launched authorized proceedings to close down Devas, which counts US funding teams Columbia Capital and Telcom Ventures in addition to Deutsche Telekom amongst its shareholders.

India is attempting to “bully its manner by means of” the dispute, Newman instructed the Monetary Instances. “It rivals the behaviour of Russia and Argentina mixed,” he stated.

India is locking horns with Devas simply as its strategy in direction of a sequence of choices by worldwide arbitration panels has drawn scrutiny.

Scottish oil producer Cairn Power has for months been attempting to power the nation to pay $1.2bn awarded by a tribunal in a stand-off over tax, echoing earlier disputes with telecoms group Vodafone and French drugmaker Sanofi.

There was a breakthrough in August when New Delhi moved to scrap the retrospective tax that had ensnared Cairn Power and Vodafone, paving the best way for a $1bn refund to Cairn. India’s income secretary Tarun Bajaj stated on the time that “we need to give a message to traders that the nation believes within the stability and certainty of taxation”.

Newman stated the federal government’s choice to ditch the tax regulation didn’t have an effect on Devas and that the group’s shareholders would “proceed to implement our authorized rights”.

Sizing up property

With little signal of India paying up in its dispute, Newman says Devas is sizing up Indian authorities property and it might attempt to seize them overseas. The menace carries echoes of Elliott’s sensational seizure of an Argentine naval vessel in Ghana in 2012, throughout a marketing campaign that set new and controversial precedents for pursuing monetary claims in opposition to sovereign states.

“Folks will likely be stunned by what number of property India has,” stated Newman. Belongings liable to seizure “could possibly be actually something”.

The Indian Parliament building in New Delhi
The Indian parliament constructing in New Delhi. The dispute between Devas Multimedia and India dates again to 2005 © Cash Sharma/AFP by way of Getty

Planes owned by Air India could possibly be subsequent, topic to a court docket’s choice. In June, Devas shareholders filed a lawsuit within the southern district of New York attempting to ascertain that the state-owned airline is “the alter ego” of India and due to this fact additionally liable, following an identical transfer by Cairn. A choose in Seattle in August ordered Antrix to disclose particulars of its property to Devas shareholders.

The sprawling dispute between Devas and New Delhi, which dates again to 2005, has included lawsuits in India, the US, Switzerland, the Netherlands, the UK and France and rulings by three arbitration panels.

Devas agreed in 2005 to lease satellite tv for pc spectrum from Antrix to develop a broadband community and to pay greater than $300m, in response to a Chennai court docket submitting this 12 months.

However in early 2011, after an investigation by India’s official auditor into the alleged underpricing of web licences by the area ministry, state-owned Antrix cancelled the contract with Devas, citing power majeure.

Based on the Chennai submitting, Devas alleges the contract was cancelled “illegally” and claims “irreparable loss”. It has already paid about $130m for the satellite tv for pc spectrum, stated an individual aware of the matter.

Since then, Devas has received a sequence of tribunal choices. In 2015, the Worldwide Chamber of Commerce discovered Antrix had “unlawfully” annulled the contract and ordered it to pay $562m in damages plus $100m in pre-award curiosity. With further curiosity operating at 18 per cent a 12 months, the award is price about $1.2bn. Two additional tribunals have additionally present in Devas’s favour, taking the overall awarded to about $1.3bn.

Nonetheless, in November the Indian Supreme Courtroom halted the gathering of the $1.2bn ICC award after the attorney-general stated India had found “a severe fraud”.

Antrix filed a winding up petition in opposition to Devas earlier this 12 months, claiming the award of the contract was “mired in fraud and corruption”, and in Could India’s Nationwide Firm Legislation Tribunal appointed a liquidator for Devas.

“It’s shocking for Antrix as to how a stayed award is being tried to be enforced by Devas throughout the globe,” Antrix instructed the Monetary Instances. It stated the unique settlement that Devas entered into with then-officials of Antrix was “fraudulent” and that “Devas lacked the technical competence to fulfil their obligation underneath the settlement”.

It added: “Antrix is vehemently opposing this movement throughout the globe wherever such makes an attempt are being made. Antrix is hopeful of succeeding.”

Matthew McGill, accomplice at Gibson, Dunn & Crutcher, which represents Devas shareholders, stated: “To today, India has did not substantiate any allegations of fraud in opposition to Devas.”

India’s ministries of company affairs and exterior affairs didn’t reply to requests for remark.

Vultures

When at Elliott, Newman noticed a possibility in Argentina’s beaten-down bonds following the nation’s 2001 default on about $100bn of debt. Whereas most collectors accepted punitive restructurings providing about 30 cents on the greenback, Newman spearheaded Elliott’s choice, together with a small group of “holdout” collectors, to struggle by means of the courts.

“What actually captures my curiosity are these uncommon instances that epitomise the power deficiencies in governance that maintain again sure nations from their full potential,” stated Newman, who has been writing a thriller, Undermoney, throughout a retirement cut up between Florida and upstate New York. “In Argentina, it was utter disdain for honouring borrowing contracts. In India, it’s full disrespect for personal enterprise, particularly these from overseas.”

Elliott argued that Argentina mustn’t proceed to pay bondholders who accepted the restructurings with out paying the holdouts in full as nicely. US choose Thomas Griesa accepted the argument and put an injunction on anybody serving to Argentina keep away from his order to pay the holdouts.

President Cristina Fernández de Kirchner refused to buckle, branding the holdouts “vultures” and “monetary terrorists”, however in 2016 the brand new president Mauricio Macri agreed to pay $4.7bn, together with $2.4bn to Elliott.

Newman doubts the battle with India will eat the 15 years it took to resolve the Argentina dispute, however burdened “you want a robust will” to see it by means of.

“Typically it takes time for a sovereign to recognise that not all collectors will fold their tents and disappear,” he stated.

laurence.fletcher@ft.com

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