Ericsson teaches Anil Ambani and India’s nascent bankruptcy system a lesson

In recovering $80 million from tycoon Anil Ambani, the Swedish company’s lawyers played the nascent bankruptcy system expertly

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…