Ex-Elliott national debt chief prepares for the final battle in India

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The man who brought $ 2.4 billion from Argentina is now coming to India.

Jay Newman led the US hedge fund Elliott Management’s 15-year struggle to force the Argentine government to pay its defaulted debt. The campaign, which was successful in 2016 when the country agreed to settle the claims of “holdout” creditors, is considered one of the largest hedge fund trades.

Now, the 69-year-old, who has built a reputation for high-risk wagering on defaulted sovereign debt from Latin America to Asia during his more than four decades career on Wall Street, says a case helped lure him out of retirement .

Newman was hired by a group of shareholders in Devas Multimedia, a satellite and telecommunications company involved in a battle with the Indian government. Founded by a former Goldman Sachs banker, Devas received approximately $ 1.3 billion in arbitration after terminating a contract it signed with an Indian state-owned company called Antrix to develop broadband connections a decade ago. The interest on the amount owed is approximately $ 350,000 per day.

India has refused to pay because the original competition for the contract was fraudulent and has initiated legal proceedings to close down Devas, which owns US investment groups Columbia Capital and Telcom Ventures and Deutsche Telekom.

India is trying to “fight its way through” the dispute, Newman told the Financial Times. “It competes with the behavior of Russia and Argentina together,” he said.

India is attacking Devas, as has its stance on a number of rulings by international arbitration tribunals.

Scottish oil producer Cairn Energy has been trying for months to force the country to pay $ 1.2 billion, which was awarded by a tribunal in a tax dispute, reflecting previous disputes with telecommunications giant Vodafone and French drug maker Sanofi.

A breakthrough came in August when New Delhi sought to get rid of the retrospective tax that had ensnared Cairn Energy and Vodafone, paving the way for a $ 1 billion refund to Cairn. India’s Finance Minister Tarun Bajaj said at the time: “We want to signal to investors that the country believes in the stability and security of taxation”.

Newman said the government’s decision to abandon the tax law had no impact on Devas and that the group’s shareholders “would continue to enforce our legal rights.”

Assess assets

With little evidence of India paying in its dispute, Newman says Devas could evaluate the Indian government’s assets and attempt to confiscate them overseas. The threat recalls Elliott’s sensational seizure of an Argentine naval ship in Ghana in 2012, during a campaign that set new and controversial precedents for prosecuting financial claims against sovereign states.

“People will be surprised how many assets India has,” Newman said. Attachable assets can be “literally anything”.

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

Air India owned aircraft could be the next, subject to a court decision. In June, Devas shareholders filed a lawsuit in the southern New York borough to determine that the state airline was “the alter ego” of India and therefore liable after a similar move by Cairn. In August, a Seattle judge ordered Antrix to give Devas shareholders details of their property.

The far-reaching dispute between Devas and New Delhi, which dates back to 2005, included lawsuits in India, the United States, Switzerland, the Netherlands, Great Britain, and France, as well as rulings from three arbitration tribunals.

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

But in early 2011, following an investigation by the official Indian auditor into the space ministry’s alleged undervaluation of internet licenses, the state Antrix terminated the contract with Devas, citing force majeure.

According to the Chennai file, Devas claims the contract was “illegally” terminated and claims “irreparable loss”. It has already paid around $ 130 million for the satellite spectrum, said a person familiar with the matter.

Since then, Devas has won a number of court decisions. In 2015, the International Chamber of Commerce found Antrix “illegally” annulling the contract and ordered them to pay $ 562 million in damages, with an additional 18 percent interest per annum, the award is worth around US $ 1.2 billion. Dollars worth. Two other tribunals have also ruled in favor of Devas, increasing the total to approximately $ 1.3 billion.

However, in November, the Indian Supreme Court halted the collection of the ICC price of $ 1.2 billion.

Antrix filed a liquidation motion against Devas earlier this year, claiming the contract award was “deep in fraud and corruption,” and in May India’s National Company Law Tribunal appointed a liquidator for Devas.

“Antrix is ​​surprised at how devas around the world are trying to enforce a suspended bonus,” Antrix told the Financial Times. It stated that the original agreement that Devas had made with the then Antrix officials was “fraudulent” and that “Devas lacked the technical expertise to fulfill its obligations under the agreement”.

It added, “Antrix vehemently opposes this application worldwide wherever such attempts are made. Antrix hopes for success. ”

Matthew McGill, Gibson, Dunn & Crutcher partner who represents the shareholders of Devas, said, “To date, India has not substantiated any allegations of fraud against Devas.”

India’s corporate and foreign affairs ministries did not respond to requests for comment.

vulture

While working at Elliott, Newman spotted an opportunity in Argentina’s troubled bonds after the country defaulted in 2001 with approximately $ 100 billion in debt. While most creditors accepted criminal restructuring at around 30 cents a dollar, Newman cited Elliott’s decision to fight their way through the courts along with a small group of “denial” creditors.

“What really piques my interest are the rare cases that epitomize the chronic governance deficits that hold certain countries from reaching their full potential,” said Newman, who has written a thriller. Underpayment, during a retirement split between Florida and New York State. “In Argentina, keeping loan agreements was a complete disregard. In India there is complete disrespect for private companies, especially those from abroad. “

Elliott argued that Argentina should stop paying bondholders who accepted the restructuring without also paying the holdouts in full. US Judge Thomas Griesa accepted the argument and issued an injunction against anyone who helped Argentina circumvent its order to pay the holdouts.

President Cristina Fernández de Kirchner refused to give in, calling the objectors “vultures” and “financial terrorists”, but in 2016 the new president Mauricio Macri agreed to pay $ 4.7 billion, including $ 2.4 billion to Elliott.

Newman doubts the struggle with India will take the 15 years it took to settle the Argentine dispute, but stressed that “it takes a strong will” to carry it through.

“Sometimes it takes a sovereign time to realize that not all believers fold their tents and disappear,” he said.

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