Argentina denounces hedge funds' 'extortionate power' over debt

[Judi Lynn]

Source: Agence France-Presse

Argentina denounces hedge funds' 'extortionate power' over debt

AFP
April 30, 2015, 3:13 am

New York (AFP) - Argentina's economy minister went before a UN forum Wednesday to accuse so-called vulture funds of gaining "extortionate power" over countries like his own that seek to restructure their sovereign debt.

Argentina has been embroiled in a long, and so far unsuccessful, legal battle with two US hedge funds who have demanded full repayment of $1.33 billion in debt the South American country defaulted on in 2001.

A US federal judge has sided with the hedge funds, blocking an Argentine plan to restructure its debt with holders of the remaining 93 percent of its defaulted debt.

"The power the vulture funds have today is intolerable," said Argentine Economy Minister Axel Kicillof, arguing that they put at risk restructurings of sovereign debt everywhere.




Read more: https://au.news.yahoo.com/thewest/business/world/a/27463229/

[Dont call me Shirley]

1. Can the International Court prosecute these extortionists, economic terrorists?

[spoutinghorn]

2. Argentina borrowed the money

Why should they now be exempt from paying it back?

If I tried to pull this stunt on my creditors they would foreclose my house and ruin my credit, why should a huge, wealthy government be able to get away with it?

[metalbot]

3. The fact that one has borrowed money does not obligate one to pay it back

When lending institutions create loans, they set the interest rate in part based on the risk that they won't get paid back. If the mere fact that you borrowed money means you have to pay it back under all circumstances, then there is no risk for lenders, which would then encourage lenders to make risky loans.

If Argentina were to default, they would damage their credit, and future loans will reflect interest rates that are higher due to the risk that the loans won't be repaid - exactly the same situation that you as an individual would face.

[geek tragedy]

5. wait, whut?

The credit risk element of the interest rate reflects the risk that the borrower WON'T pay back the loan.

Not that they will have an excuse to get out of it.

Debtors fail to meet their obligations all the time. It's called a 'default' and very often people wind up not paying even though they're obligated to--insolvency, refusal to pay are the two most common.

[forest444]

9. The irony is that Argentina has been paying religiously since 2005.

Their payments -to the bondholders that trusted in New York Law- have been blocked by judicial fiat, which is different (it's worth mentioning that many of these bondholders are now buying Buenos Aires Law bonds to compensate).

Can you imagine being one of the affected bondholders? Knowing Argentina made your payment; but that it's blocked because some Cayman Islands drug money laundry bribed a Wall Street judge to break existing law to attach your payments!?

[strategery blunder]

6. I read elsewhere that it is also illegal to buy bonds just so you can sue for repayment

And that some of the hedge funds in question did just that. They speculated on distressed Argentina bonds, with the express purpose of holding out during the default/restructuring and suing for full payment later.

That isn't kosher either. It's pretty much the inverse of the "preferential treatment of creditors" problem in bankruptcy law: if you pay off a large debt to your friend, then declare bankruptcy, your other creditors can petition the bankruptcy court to claw back the repayments you made preferentially to the one creditor so they can get their share as well.

Except in this case, the hedge funds bought up the junk bonds as speculative "investments" so they could hold out during the default and sue later, years after the default, to get 100 cents on the dollar (i.e. preferential treatment) when bondholders who bought the bonds as bona fide, long-term investments only received a cents-on-the-dollar return.

It'd be like you taking out a loan from your creditors, you declare bankruptcy, they foreclose on your house and ruin your credit, and then your creditors come back and sue you for 100 cents on the dollar years after your bankruptcy discharge.

[forest444]

10. +1!

And here's the best part: the vulture funds have full access to U.S. courts despite being based in the Caymans (while facilitating billions in tax evasion annually), and at least in Singer's case, have already collected in hundreds of millions in CDS insurance payouts!

A true poster child for the state of lawlessness that pervades offshore banking - and the Greasa court.

[forest444]

7. Those are not "creditors" and Argentina's not refusing to pay; their payments are being blocked.

The legitimate bondholders are the ones losing out. And to whom?

To Cayman Islands drug money laundries that bought the Argentine bonds in their possession for 20 cents on the dollar or less. In NML 's case (Paul Singer's outfit), nearly $ 1 billion is being demanded for bonds bought from resellers (not Argentina) for $48 million- and Singer has already collected several hundred million in CDS insurance on the bonds anyway!

This is the same Paul Singer that has already bilked taxpayers for up to $12 billion in TARP funds, and whose tactics have bankrupted Delphi Automotive and Caesar's Entertainment among others. That's tens of thousand of jobs that are probably never coming back.

Besides which, they're not even for the most part "American" investors, since these activities are mostly carried out from his Cayman Islands-based hedge fund. The slimy little imp has full access to U.S. courts - when in reality he should only have full access to U.S. jails.

[FlatBaroque]

11. Thank you for the illuminating comments.

Troublesome for those who defend vulture funds.

[forest444]

12. Thanks - and yes, they keep quite a few internet trolls on their payroll.

Laundering drug money does buy a lot of nice things - like a few friendly Congresscritters (until they get their salami caught in a Dominican Republic brothel, anyway).

[iandhr]

4. Argentina has had debt problems for awhile.

Last edited Wed Apr 29, 2015, 05:45 PM - Edit history (1)

And they turned to these "vulture funds" to kick the can down the road and not solve the root problem. I find the type of business the practice to be distasteful. I wouldn't disagree if you said it was immoral. But Argentina screwed themselves when they decided to jump into bed with these people no one forced them to do it.

[forest444]

8. But that's not what happened.

NML Capital, the Cayman Islands-based drug money laundry, bought their Argentine bonds from resellers, not Argentina.

They paid $48 million, and now want a billion. Best of all, they've already collected almost that much in CDS insurance payouts anyway. The CDS payout is why the bonds were declared to be in "default" when they clearly weren't (Argentina's payments were illegally blocked, which is different).

If that's not distasteful for you, just wait until Singer does the same to the U.S. bond market - which thanks to Greasa's ruling, he's just one Congressional default away from doing.

[FlatBaroque]

13. Are you intentionally trying to mislead

or just having some internet fun?