NEW DELHI: BlackRock's private credit arm, alongside other lenders including BNP Paribas's HPS Investment Partners, is fighting to recoup over USD 500 million in an alleged fraud involving telecom-services companies owned by an Indian-origin man Bankim Brahmbhatt, according to a report from The Wall Street Journal. The lenders filed a lawsuit in August, alleging Brahmbhatt's companies, including Broadband Telecom and Bridgevoice, used fake accounts receivable as collateral for loans.
The Journal's reporting highlights that the firms now owe the lenders more than US$500 million. The dispute centres on a kind of debt deal known as asset-based finance, where the borrower puts up collateral in the form of revenue generated by specified businesses, equipment, or customer receivables. This type of debt, once seen as having grown significantly, now rests with a small group of private-credit investors, which includes BlackRock’s mammoth global credit arm, GIP HPS.
According to the WSJ, the lenders allege that they discovered discrepancies when performing an internal check that led to their suspicion of fraud. The lawsuit claims Brahmbhatt created an elaborate scheme of fake email domains and customer lists dating back to 2018. Brahmbhatt's companies allegedly sold off-chain finance assets in India and Mauritius, according to the lawsuit.
Brahmbhatt’s telecom companies had filed for bankruptcy in August, shortly after the lenders' lawsuit. The WSJ notes that earlier this year, an employee received strange, un-solicited emails, which are now believed to have been an attempt to fabricate records. While Brahmbhatt has, through his attorney, denied the fraud allegations, the lenders are determined to recover the massive sum. The paper states that "The investment represents a fraction of HPS’s USD 179 billion in assets under management," yet underscores the growing scrutiny on private-credit deals.
Meanwhile, a Bloomberg report quoted BNP as saying that its trading unit took a USD 190 million (USD 220 million) hit in the third quarter to account for “a specific credit situation.” Executives at the firm declined to name the clients in question, but they also insisted the hit was a one-off and not emblematic of a worsening credit environment.
“We had one specific file in global markets, but we don’t give any colour or names,” BNP Paribas Chief Financial Officer Lars Machenil said in an interview on Bloomberg Television. “But it is not a usual suspect, it is in the sphere of payment.”
