Latin America

Judi Lynn

(160,609 posts) Tue Oct 7, 2014, 04:01 AM Oct 2014

Argentina: UN group condemns vulture funds

Argentina: UN group condemns vulture funds
Submitted by Weekly News Update... on Tue, 10/07/2014 - 00:06

The Geneva-based United Nations Human Rights Council passed a resolution on Sept. 26 condemning "the activities of vulture funds" and regretting the effect payments to the funds could have "on the capacity of governments to fulfill their human rights obligations." The resolution was presented by Argentina, which was forced into technical default on July 30 after US district judge Thomas Griesa in New York blocked the country from paying interest to its bondholders unless it settled with US two hedge funds, NML Capital and Aurelius Capital Management; the two companies are known as "vulture funds," investment groups that try to profit by buying weak debt the debtors are likely to default on. Argentina's effort in Geneva was backed by Algeria, Brazil, Russia and Venezuela. The Human Rights Council approved the resolution in a 33-5 vote, with nine countries abstaining; the opposing votes came from the US, UK, Czech Republic, Germany and Japan. "Vulture funds aren't just an economic problem," said Argentine foreign minister Héctor Timerman, who was in Geneva for the vote. "They represent a political, social problem that affects the lives of all the citizens" in many countries since they deprive governments of resources they could use for social services.

The vote in Geneva was Argentina's second success in international diplomacy during the month. At a plenary meeting in New York on Sept. 9 the United Nations General Assembly adopted a resolution promoted by Argentina entitled "Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes." Currently countries have to negotiate debt restructuring deals with their creditors when they are unable to meet their debt obligations; the resolution seeks to set up an international system for countries similar to bankruptcy proceedings for companies and individuals. Argentina's default resulted from NML Capital and Aurelius Capital Management's refusal to join with the other creditors in a settlement Argentina had worked out for its massive 2002 default. The General Assembly resolution was sponsored by the Group of 77 (G77), joined by China; 124 countries voted for the measure, while 11 voted against it and 41 abstained. (United Nations, Sept. 10; BBC, Sept. 26; Adital, Brazil, Sept. 30)

Meanwhile, Argentina is trying to circumvent Judge Griesa's decision blocking interest payments to the bondholders that have settled with the country. In September Argentina's Congress passed legislation allowing the bondholders to be paid in Argentina rather than New York, taking the issue out of the judge's jurisdiction. An obviously irritated Griesa declared Argentina in contempt of court during a hearing on Sept. 29. It is not clear what effect the judge's contempt declaration will have. "We are in uncharted waters," Arturo Porzecanski, an economist at American University's School of International Service, told the New York Times. (NYT, Sept. 29)

http://ww4report.com/node/13604

(Short article, no more at link.)

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Argentina: UN group condemns vulture funds (Original Post) Judi Lynn Oct 2014 OP

A Short History of Vultures Judi Lynn Oct 2014 #1

Judi Lynn

(160,609 posts)

1. A Short History of Vultures

Reply to Judi Lynn (Original post)

Sun Oct 12, 2014, 12:49 PM

Oct 2014

A Short History of Vultures

Long before Argentina’s latest default, there was Elliott Associates L.P. v. Republic of Panama.
BY Saskia Sassen

AUGUST 3, 2014

When Argentina defaulted on its debt for the second time in 13 years this week, the financial world was shocked, both by the default itself and, perhaps even more so, by the fact that a small minority of debt holders was willing to torpedo Argentina's debt restructuring. But while the fight between Buenos Aires and its creditors may be in the headlines now, it's not a new story. It began 18 years ago with a perversion of international law in a New York City court and a then-obscure hedge fund that was called a vulture.*

One firm in particular deserves the blame for Argentina's current situation -- or kudos for its innovation, depending on how you look at it. In 1977, Paul Singer founded the hedge fund Elliott Associates L.P. with $1.3 million from friends and family. For nearly two decades, the firm grew by investing in various equities markets. But in 1995 Elliott Associates transformed from just another New York City hedge fund to a pioneer in the world of international finance. And today, 19 years later, the newest iteration of the same fund has played a crucial role in bringing Argentina to default.

In October 1995, Elliott Associates L.P. purchased approximately $28.7 million of Panamanian sovereign debt for the discounted price of $17.5 million. The banks holding those bonds, a group that included heavy hitters like Citi and Credit Suisse, had given up on repayment from Panama. To cut their losses they sold their holdings to Elliott.

When Panama's government asked for a restructuring of its foreign debt in 1995, the vast majority of its bondholders agreed. Not Elliott. In July 1996, Elliott Associates, represented by one of the world's most high-profile securities law firms, filed a lawsuit against Panama in a New York district court seeking full repayment of the original $28.7 million -- plus interest and fees. The case made its way from a district court in Manhattan to the New York State Supreme Court, which sided with Elliott. Panama's government had to pay the firm over $57 million, with an additional $14 million going to other creditors.

More:
http://www.foreignpolicy.com/articles/2014/08/03/a_short_history_of_vultures_argentina_default_elliott_associates_panama

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