Ericsson Teaches Anil Ambani – and India – a Lesson

swatkats

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Anil Ambani’s not going to jail after all, and Ericsson AB got its money. The Swedish company’s lawyers should take a bow.

While the future of the Indian tycoon’s shrinking empire remains shrouded in uncertainty, at least questions over his near-term living arrangements got answered on Monday. Ambani thanked his “respected” elder brother, Mukesh, and sister-in-law, Nita, after avoiding a three-month prison term. India’s richest man showed up just in time to help his younger sibling who has, in a little over a decade, lost 99 percent of his $31 billion net worth.

The local unit of Ericsson had accepted a Rs 5.5 billion ($80 million) settlement to keep its petition for Reliance Communications Ltd.’s $7 billion bankruptcy in abeyance. The telecom equipment vendor subsequently won a contempt-of-court order to put Chairman Anil Ambani in jail if the long-delayed payment – which he personally guaranteed – wasn’t received by Tuesday.

When a history of the early years of India’s 2016 bankruptcy code is written, Ericsson’s lawyers will deserve a glowing mention. For an unsecured creditor to walk away with a 48 percent recovery of its claim – while secured lenders wait patiently for RCom to sell its spectrum, redevelop its land assets and pay them something – shows that the Swedish firm played its cards well.

It also shows the secured creditors, led by State Bank of India, in a rather poor light. They have been deluding themselves since June 2017, when they agreed to an out-of-court restructuring, including a plan to convert part of their debt into equity at almost 25 rupees a share. Luckily that plan went nowhere. RCom shares closed on Monday at 4 rupees.

A revised restructuring later that year also saw little progress. RCom, having decided to exit its money-losing 2G and 3G mobile operations, planned to offload spectrum, fiber and media convergence nodes to Mukesh Ambani’s hyper-aggressive 4G service. RCom and Jio officially called off the deal on Monday, just as the younger Ambani got bailed out by his brother. With RCom now seeking an in-court bankruptcy resolution, banks are back to square one.


To see just how badly they have bungled RCom, consider the stinging rebuke the lenders received from an appeals judge at India’s bankruptcy tribunal last week:

“You (State Bank of India) have failed. JLF (Joint lenders’ forum) has failed. No sale (of assets) took place. You clapped with RCom and claimed that you would recover around Rs 37,000 crore ($5.4 billion) from sale to Jio ... You failed ...”

Even now, the lenders have no real plan. Jio's entry has crashed prices of telecom services, and led to shutdowns and bankruptcies, including of RCom. Mukesh Ambani may still have appetite for assets controlled by his younger brother, but a bidding war is doubtful.

Recent comments by the founder of India’s most successful telecom company, Bharti Airtel Ltd. Chairman Sunil Mittal, should worry the banks deeply. When reporters asked Mittal on the sidelines of the Mobile World Congress in Barcelona if he’d bid for RCom’s spectrum out of bankruptcy, he questioned the very premise of airwaves being sold by tribunal-appointed resolution professionals. The spectrum was a sovereign asset belonging to the Department of Telecommunications, Mittal said, according to an Economic Times report. He asked why the DoT didn’t take the spectrum back and pool it with its own auctions.

As secured lenders cringe at that thought, Ericsson’s lawyers can bask in their success. First, they snagged a sweet deal by exploiting RCom’s initial reluctance to enter in-court bankruptcy. Then, they succeeded in getting a credible jail risk for Anil Ambani thrown into the mix to ensure the deal was honored. Finally, they got their client $80 million. Really nicely done.


Source: https://www.business-standard.com/article/companies/ericsson-teaches-anil-ambani-and-india-s-nascent-bankruptcy-system-a-lesson-119031900331_1.html
 

Lord Nemesis

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What lesson? Given the 1.25 Lac crore worth of unpaid loans of Mukesh Ambani, whose money did Ericsson get in the end, while those brothers laughed their way out after skimping out a significant chunk of the payment. As for SBI, they will also do a settlement that is a minute fraction of the money owned and then they will again be allowed borrow even more funds indiscriminately. A settlement should also mean that they are blacklisted from ever being able to borrow money.

The audacity of these brothers and their confidence in their ability to get away with anything should be apparent from this

https://thewire.in/law/two-supreme-court-employees-sacked-for-tampering-with-order-in-anil-ambani-case-report
 
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fractal

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Allow banks with bad debts to fail. No taxpayer bailouts. Nationalized banks to be freed of political interference. Banks will automatically learn to be more careful in future
 

abhi1984

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It is more like Ericsson showed that Indians and courts don't mix. Everyone, including an Ambani, is afraid of going to court - some due to way long processing by courts, some due to the fact that court matters are public and might cast a light on their reputation.
 

Lord Nemesis

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Allow banks with bad debts to fail. No taxpayer bailouts. Nationalized banks to be freed of political interference. Banks will automatically learn to be more careful in future
The money they give out as bad loans also belongs to the people. With nationalized banks like SBI, it belongs to people who become part of vote banks for politicians. So, the govt would rather screw even more tax payers to bail out these banks.
 
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rdst_1

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They were lucky that the company didn't go into insolvency proceedings. Even now I think, there is a clause that they will have to return the money if the company becomes insolvent.
NCLAT also asked the three parties — RCom, lenders and Ericsson — to find a way to ensure that the matter does not go back to the corporate insolvency process. If NCLAT passes an order pushing RCom back into insolvency, then Ericsson would need to refund any funds that it would have got from RCom, the bench observed.

RCom has said it wants to voluntarily go back into the insolvency process, saying it will help it sell its assets in a time bound manner. Under the Insolvency and Bankruptcy Code 2016, financial lenders such as SBI have priority in getting repaid from the sale of assets, while operational creditors like Ericsson are way down the list.
Source - https://m.economictimes.com/industry/telecom/telecom-news/how-did-it-go-this-bad-for-anil-ambani-the-unmaking-of-billionaire/amp_articleshow/68436489.cms
 
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fractal

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It is perfectly fine to have regulated banks for pensioners but then they should not be allowed to make risky loans like they do today. Since the bank is regulated to not take excessive risk it takes care of the trust issue.

The point is Government bailout of banks is not to help small savings and pensioners but big business.
 

pauldmps

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Don't worry for him. He's soon going to get 30,000 crores of Rafale money.
 

pratikb

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Rafael is manufactured scam by RaGa for his narrative and Supreme Court and CAG all have bunked his scam allegations.
Can you show proofs?
He himself could never produce.
He produced some French tape that also turned out fake.
 

pauldmps

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I would rather not derail this thread with Rafale discussion. If a new thread is opened, we'll discuss there.
 

rdst_1

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Rafael is manufactured scam by RaGa for his narrative and Supreme Court and CAG all have bunked his scam allegations.
Can you show proofs?
He himself could never produce.
He produced some French tape that also turned out fake.
The same is true for 2g scam as well. That didn't stop the opposition from making the allegations and asking for votes on that issue.
Everyone knows it is near impossible to convict powerful people in scams based on conjecture because the proofs are just not available in the public domain. That's true for every government whether Congress-led or BJP-led. The collusion is just too-hard to prove because the systems are exploited from the inside with no transparency or accountability.
 
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pratikb

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are you aware of aircel maxis deal?
2g scam was exposed by subramanyam swami and he wont touch the case unless he has concrete evidence.
do read up about aircel maxis deal and role of bc.
 

rdst_1

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are you aware of aircel maxis deal?
2g scam was exposed by subramanyam swami and he wont touch the case unless he has concrete evidence.
do read up about aircel maxis deal and role of bc.
So, since he had concrete evidence, can you tell me who all politicians have been convicted by the court in connection with the 2g scam.
 

pratikb

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we all know court connections of congress and how it manipulates even supreme court.
just to give you latest example.
can you tell me how many times karthi and senior chidambaram has got bail?
i know you wont read so here is link for you

https://timesofindia.indiatimes.com/india/court-extends-chidambarams-pre-arrest-bail/articleshow/66469704.cms


https://www.asianage.com/india/all-india/180219/protection-from-arrest-to-chidambaram-karti-extended-in-aircel-maxis-case.html



can you tell me how national herald scam is running?

entire gandhi clan is out on bail.

dont worry.
 
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