Ceragon unlikely to collect big Peruvian debt

About 11% of the quantity ($12.4 million) was debt to a single buyer towards which authorized proceedings had simply been begun. “We imagine that we’re taking energetic steps to gather the debt and we’ll proceed to look at the state of affairs carefully,” promised CFO Ronen Stein.

Two and a half months later, at the beginning of Could, Ceragon revealed its monetary outcomes for the primary quarter of 2023 in addition to its 20-F report for 2022.

in the course of the convention name after the quarterly outcomes, a correction made within the 2022 annual report was revealed. Stein drew the eye of traders to the truth that the correction had moved Ceragon from an operational revenue of $1.4 million, as reported in February, to an operational lack of $10.9 million. The correction additionally affected the underside line with the $7.4 million GAAP web loss reported in February widening to a $19.7 million GAAP web loss.

The widening loss had arisen from that very same single buyer. Stein informed the convention name. “Not too long ago, there was a change in circumstances, which lowered the chance of gathering the debt in full within the close to time period, and in consequence we discovered it acceptable to acknowledge a provision for credit score losses,” which grew following the correction of $14.3 million, “primarily from a single buyer.”

The expanded report states that after a number of makes an attempt to gather the debt from the client, together with an try and settle the phrases of funds, in addition to “because of a change within the interplay with the client, which became a dispute, and extra difficulties in regards to the steps the corporate took to gather the debt,” the chance of gathering the debt successfully within the close to time period is small, and the corporate couldn’t assure that its steps on the topic can be profitable.

Stein added, “We need to stress that we’re persevering with to take vigorous steps to gather the debt,” and that this challenge has no impact on the corporate’s forecast for 2023 (a forecast that was additionally raised later this yr and at the moment cites progress of 13-18% in income to $348-334 million and annual non-GAAP profitability).

The supply of the debt that elevated Ceragon’s loss final yr was from an enormous mission during which it was engaged in Peru with Orocom. Ceragon, which gives wi-fi transmission options, reported in 2018 that it had been awarded a mission with Orocom as a part of the Peruvian authorities’s initiative to deploy a wi-fi community that would supply broadband connectivity to tens of millions of Peruvians residing in distant rural areas. The contract was price not less than $26 million.

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In 2018, Ceragon reported that it had offered $29.1 million in financial institution ensures to the federal government on behalf of Orocom, and acquired two representatives on the Peruvian firm’s board of administrators. In reviews the next years, the corporate reported that the ensures had been returned and that its membership on the board of administrators had been canceled.

Intelligence firm gathering money owed worldwide

Nonetheless, over time, the Peruvian firm ran up a debt to Ceragon. “Globes” has discovered that one of many steps taken by the corporate in an try and recuperate the debt was hiring CGI Group, for lots of of hundreds of {dollars}, together with a $200,000 advance. CGI offers in enterprise intelligence and strategic consulting and was headed by the previous head of the Shin Wager Yaakov Peri and Zvi Naveh.

CGI often hits the headlines. For instance, in 2019, priceless 18th century jewellery was stolen from a museum in Dresden, Germany, as a part of a complicated theft. CGI helped remedy the thriller and a couple of yr later suspects had been arrested who confessed to the crime.

In one other case, revealed by “Globes” final yr, Israeli businessman Gad Ze’evi requested for CGI’s assist to gather a debt from the Bulgarian authorities, and CGI provided an answer: African nation Congo would order previous weapons from Bulgaria, which might ship the gear, and when the fee was transferred, Ze’evi would take the quantity owed to him . The plan didn’t succeed and the events blamed one another for the failure, however didn’t pursue authorized proceedings towards one another.

One other case involving CGI, reported in 2018, involved elections in Georgia. CGI was employed by the president who was one of many candidates, to search out details about the rival occasion. He found, in keeping with reviews, an try and plan an assassination of the previous prime minister, who was additionally the richest man within the nation. In Israel, CGI was employed by Oracle after it was disqualified from the federal government Nimbus cloud tender.

Relating to the Ceragon case, CGI CEO Zvi Naveh mentioned, “We don’t remark within the media about our purchasers and our actions in Israel and the world. We stress that CGI is supported by authorized recommendation in each nation the place we work, to make sure exercise in accordance with the native legislation.”

Hundreds of thousands of {dollars} evaporated in distant villages

“Globes” has discovered that CGI started working with Ceragon on on the Peruvian debt challenge firstly of the yr. In April, CGI submitted an interim report on the matter to Ceragon, which estimating the probabilities of gathering the debt from the corporate or its house owners. After gathering intelligence from open sources (OSINT) and talking to sources in Peru and Colombia, who had been near the house owners of the Peruvian firm. CGI acknowledged that in keeping with a supply who is aware of the proprietor effectively, he was not personally concerned within the firm and it was believed that if he might keep away from fee with out severe penalties, he would achieve this.

Additionally, though the Peruvian firm evades paying suppliers, it nonetheless applies for presidency tenders in Peru and advantages from its connections there. The report additionally discovered plenty of unfavorable reviews concerning the proprietor from the previous few years, together with an investigation of an organization underneath his management in Honduras on suspicion of fraud, and arrest warrants issued in Guatemala for managers of one other firm underneath his management.

CGI’s interim report included conclusions in keeping with which the prospect of repaying the debt is low with out utilizing industrial “leverage” and authorized procedures or discovering vital data, though the advice was to not provoke authorized proceedings, amongst different issues, for concern of an extended course of during which the opposite occasion might accuse Ceragon of wrongful conduct.

Ceragon mentioned, “The corporate doesn’t often touch upon data allegedly associated to it that’s not public data revealed by it in reviews in keeping with legislation, together with in relation to its prospects, suppliers, service suppliers, and so on.”

Avoiding a hostile takeover try

Ceragon, led by CEO Doron Arazi, is traded on Nasdaq with a market cap $165 million. The corporate’s share value has risen 3% for the reason that begin of 2023, however is down nearly 70% for the reason that begin of 2021. Final yr, the corporate’s board of administrators warded off a hostile takeover by US rival Aviat, which bid to purchase Ceragon for $259 million, however didn’t win assist from shareholders in an try to vary the board of administrators. On the time, Ceragon’s board of was headed by Zohar Zisapel, who died in Could.

Within the first half of 2023, Ceragon reported $170 million income, up 20% from the corresponding interval of 2022 (of the quantity, 15% of income was from Latin America). Within the first half of 2023, the corporate swung to an working revenue of $10.4 million and a web revenue of $4.1 million.

Printed by Globes, Israel enterprise information – en.globes.co.il – on October 5, 2023.

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