In Hedge Fund, Argentina Finds Relentless Foe
Peter Eavis and Alexandra Stevenson
The New York Times
|
|
|
|
|
|
149
''... billionaire Paul E. Singer has
about 300 employees, yet (it) has managed to force Argentina, a nation of
41 million people, into a position where it now has to contemplate a
humbling surrender...''
So, what have we got here?A zionist hungry for 41 more
million humans and a whole Country to ''consume''? Is this such a simple situation that we have to easily swallow? Like we do for Gaza -with some extra tears and stomach ache - for Syria , the rest of the Middle East ,Ukraine , and so on? An incessant , horrible events' chain and our silence to be interpreted as cowardice or slimy approval?
NO! We shall AROUSE and REVOLT! Now, in our room, in our house! You think 'they' would care for any of our 'guns and powders' in the battlefields??? No , they wouldn't! They can't care less! They don't break, we do!
But our deeply heartfelt voice 'NO, NO MORE'! from our arising conscience , the missiles from our insurrected cognizance that we need their erroneous existence in our life no more, their atrocities no more , their pedofilia no more, their bossing and manipulation no more,will target their matrixes and their secret bases and their secret weapons and ruin them!Yes they will!
Just stand up NOW! Shout at them with all your heart's compassion for HUMANITY:
STOP IT NOW! LEAVE US NOW! BE GONE NOW!
and so BE IT! The Higher Self will come in now!
m.l.p.
The hedge fund firm of billionaire Paul E. Singer has
about 300 employees, yet it has managed to force Argentina, a nation of
41 million people, into a position where it now has to contemplate a
humbling surrender.
Argentina on Wednesday failed to make scheduled payments on its government bonds. The country has the money to pay the bonds. But a federal court in Manhattan has ruled that unless Argentina settles its debt dispute with Mr. Singer's firm, Elliott Management, it is barred from paying its main bondholders.
Read MoreArgentina defaults and its stocks …rise?
After more than five hours of meetings on Wednesday, the sides failed to reach an agreement and the court-appointed mediator said that Argentina would "imminently be in default." Because a $539 million interest payment was not made, the ratings agency Standard & Poor's said that Argentina was in default on those bonds.
The government of Argentina now faces a stark choice: Try to restart negotiations with investors it has repeatedly called "vultures," who have for years refused to accept anything other than full repayment. Or it can remain ensnared in a default that could weigh on the country's fragile economy and unsettle global markets.
Argentina on Wednesday failed to make scheduled payments on its government bonds. The country has the money to pay the bonds. But a federal court in Manhattan has ruled that unless Argentina settles its debt dispute with Mr. Singer's firm, Elliott Management, it is barred from paying its main bondholders.
Read MoreArgentina defaults and its stocks …rise?
After more than five hours of meetings on Wednesday, the sides failed to reach an agreement and the court-appointed mediator said that Argentina would "imminently be in default." Because a $539 million interest payment was not made, the ratings agency Standard & Poor's said that Argentina was in default on those bonds.
The government of Argentina now faces a stark choice: Try to restart negotiations with investors it has repeatedly called "vultures," who have for years refused to accept anything other than full repayment. Or it can remain ensnared in a default that could weigh on the country's fragile economy and unsettle global markets.
Jacob Kepler | Bloomberg | Getty Images
Paul Singer, founder and president of Elliott Management Corp.
After the talks collapsed, the economy minister of Argentina, Axel Kicillof, characterized the negotiations as extortion.
"We're not going to sign any deal which compromises the future of Argentines," he said at a news conference in Manhattan.
Read MorePaul Singer: This threat is 'head-and-shoulders' above all others
The campaign against Argentina shows how driven and deep-pocketed hedge funds can sometimes wield influence outside of the markets they bet in. George Soros's successful wager against the pound in 1992 affected Britain's relationship with Europe for years.
While Mr. Singer's firm has yet to collect any money from Argentina, some debt market experts say that the battle may already have shifted the balance of power toward creditors in the enormous debt markets that countries regularly tap to fund their deficits. Countries in crisis may now find it harder to gain relief from creditors after defaulting on their debt, they assert.
"We're not going to sign any deal which compromises the future of Argentines," he said at a news conference in Manhattan.
Read MorePaul Singer: This threat is 'head-and-shoulders' above all others
The campaign against Argentina shows how driven and deep-pocketed hedge funds can sometimes wield influence outside of the markets they bet in. George Soros's successful wager against the pound in 1992 affected Britain's relationship with Europe for years.
While Mr. Singer's firm has yet to collect any money from Argentina, some debt market experts say that the battle may already have shifted the balance of power toward creditors in the enormous debt markets that countries regularly tap to fund their deficits. Countries in crisis may now find it harder to gain relief from creditors after defaulting on their debt, they assert.
"We've had a lot of bombs being thrown around the
world, and this is America throwing a bomb into the global economic
system," said Joseph E. Stiglitz, the economist and professor at
Columbia University. "We don't know how big the explosion will be — and
it's not just about Argentina."
As a hedge fund, Elliott's pursuit of Argentina is motivated by a desire to make money. Having bought its Argentine bonds for well below their original value, the firm stands to make a killing if Argentina pays the bonds in full. Legal filings indicate that the face value of its Argentine government bonds was around $170 million, but the firm most likely acquired many of them for much less than that. Elliott and other investors are now seeking more than $1.5 billion, which includes years of unpaid interest.
Read MorePaul Singer: US stocks 'frothy' by 'all measures'
Still, there is also something of a crusade about the battle that reveals the worldview of Mr. Singer, who is 69. A Republican donor with libertarian leanings, he has spoken out when he thinks that governments and companies have damaged the rights of creditors.
"He doesn't get into fights for the sake of fighting. He believes deeply in the rule of law and that free markets and free societies depend on enforcing it," said a fellow hedge fund manager, Daniel S. Loeb.
As a hedge fund, Elliott's pursuit of Argentina is motivated by a desire to make money. Having bought its Argentine bonds for well below their original value, the firm stands to make a killing if Argentina pays the bonds in full. Legal filings indicate that the face value of its Argentine government bonds was around $170 million, but the firm most likely acquired many of them for much less than that. Elliott and other investors are now seeking more than $1.5 billion, which includes years of unpaid interest.
Read MorePaul Singer: US stocks 'frothy' by 'all measures'
Still, there is also something of a crusade about the battle that reveals the worldview of Mr. Singer, who is 69. A Republican donor with libertarian leanings, he has spoken out when he thinks that governments and companies have damaged the rights of creditors.
"He doesn't get into fights for the sake of fighting. He believes deeply in the rule of law and that free markets and free societies depend on enforcing it," said a fellow hedge fund manager, Daniel S. Loeb.
That conviction has helped drive the creative legal
assaults that have scored big financial gains for Elliott, which has
nearly $25 billion of assets under management. Since the firm's founding
in 1977, it has on average posted a return of almost 14 percent a year.
At one point in the Argentina dispute, Elliott persuaded a court in
Ghana to seize an Argentine naval vessel that was docking in the
country. The boat was later released.
The origins of the Argentine dispute trace back to 2001, when Argentina, overwhelmed by its sovereign debt load, decided to default on its obligations. The country later offered to exchange their defaulted securities for new "exchange bonds," that were worth much less the original bonds. Most investors participated in these swaps, but some decided instead to fight the government for full repayment. These so-called holdouts included many individual investors as well as a unit of Elliott called NML Capital and other hedge funds including Aurelius Capital Management.
Read MoreArgentine default 101: What you need to know
It is legally challenging for American investors to sue foreign governments in United States courts. But in 2012, Elliott achieved a stunning breakthrough in the Federal District Court in Manhattan. Judge Thomas P. Griesa ruled that whenever Argentina paid the exchange bonds, it also had to pay the holdouts. Argentina could not ignore the ruling and pay the exchange bondholders because Judge Griesa also ruled that any financial firm that distributed payments to the bondholders would be in contempt. Argentina placed $539 million with the Bank of New York Mellon in June to pay its bondholders, but the bank did not transfer it.
Last month, the United States Supreme Court rejected Argentina's appeal, setting the stage for Wednesday's default.
"Default cannot be allowed to lapse into a permanent condition," said Daniel A. Pollack, the lawyer that Judge Griesa appointed to oversee negotiations between Argentina and the holdouts. "Or the Republic of Argentina and the bondholders, both exchange and holdouts, will suffer increasingly grievous harm, and the ordinary Argentine citizen will be the real and ultimate victim."
Others saw less of an impact from a default.
"Argentina has been living in a default reality for over 10 years," said Estanislao Malic, an economist at the Center for Economic and Social Studies of Scalabrini Ortiz in Buenos Aires, referring to a lack of access to international borrowing markets after the country's 2001 financial crisis. "This default is not a drastic change. Nothing much will change."
The origins of the Argentine dispute trace back to 2001, when Argentina, overwhelmed by its sovereign debt load, decided to default on its obligations. The country later offered to exchange their defaulted securities for new "exchange bonds," that were worth much less the original bonds. Most investors participated in these swaps, but some decided instead to fight the government for full repayment. These so-called holdouts included many individual investors as well as a unit of Elliott called NML Capital and other hedge funds including Aurelius Capital Management.
Read MoreArgentine default 101: What you need to know
It is legally challenging for American investors to sue foreign governments in United States courts. But in 2012, Elliott achieved a stunning breakthrough in the Federal District Court in Manhattan. Judge Thomas P. Griesa ruled that whenever Argentina paid the exchange bonds, it also had to pay the holdouts. Argentina could not ignore the ruling and pay the exchange bondholders because Judge Griesa also ruled that any financial firm that distributed payments to the bondholders would be in contempt. Argentina placed $539 million with the Bank of New York Mellon in June to pay its bondholders, but the bank did not transfer it.
Last month, the United States Supreme Court rejected Argentina's appeal, setting the stage for Wednesday's default.
"Default cannot be allowed to lapse into a permanent condition," said Daniel A. Pollack, the lawyer that Judge Griesa appointed to oversee negotiations between Argentina and the holdouts. "Or the Republic of Argentina and the bondholders, both exchange and holdouts, will suffer increasingly grievous harm, and the ordinary Argentine citizen will be the real and ultimate victim."
Others saw less of an impact from a default.
"Argentina has been living in a default reality for over 10 years," said Estanislao Malic, an economist at the Center for Economic and Social Studies of Scalabrini Ortiz in Buenos Aires, referring to a lack of access to international borrowing markets after the country's 2001 financial crisis. "This default is not a drastic change. Nothing much will change."
Mr. Singer, however, thinks that there are broader reasons to protect creditor rights. In particular, he has argued, doing so will help bolster a country's economy. "Imagine how much capital a country like Argentina might attract," Mr. Singer wrote in a 2005 article he wrote with Jay Newman, another Elliott employee. "If instead of defaulting seriatim and affecting a pose of anger toward creditors, it borrowed responsibly and honored its obligations."
The big question, however, is whether Argentina will ever pay Elliott what it wants. If the firm fails to collect, that would underscore the limits of its legal strategy. There is no international bankruptcy court for sovereign debt that can help resolve the matter. Argentina may use the next few months to try to devise ways to evade the New York court. Debt market experts, however, do not see how any such schemes could avoid using global firms that would not want to fall afoul of Judge Griesa's ruling.
Read MoreS&P cuts Argentina's credit rating further as talks drag on
But some debt market experts say that credit market idealists are going too far when applying their worldview to sovereign bond markets. In dire economic crises, they say, countries need to be able to slash their debt loads. The legal victories of the holdouts may embolden creditors to drive harder bargains after future defaults, these people say.
Professor Stiglitz says that this could prolong or postpone debt restructurings and extend the economic misery of over-indebted countries. "Singer and Elliott have already done a lot of damage," he said.
In Buenos Aires, some were resigned to the consequence.
"It doesn't matter if it is a judge in New York City or a president in Argentina, I feel that neither cares about people, and about the future of this country," said Sol Bodnar, 31, a film producer. "It's as if these people who have power were laughing in the face of us common citizens."
Simon Romero, Irene Caselli, and William Alden contributed reporting.
—By Peter Eavis and Alexandra Stevenson, The New York