Sunday, July 14th 2013 - 23:53 UTC

Argentina litigation with hedge funds; ‘US could end siding with Buenos Aires’ says Washington Post

The United States Justice, Treasure and State Department officials met on Friday with lawyers both from Argentina and hedge funds that refused to accept the administrations of presidents Nestor Kirchner and Cristina Fernandez debt swaps, The Washington Post reported on Saturday.

Billionaire Paul Singer is also a prominent Republican campaign donor

Forcing sovereign nations to repay their overdue debts is a controversial topic admit the US State and Justice Departments

According to the article published on the daily's online edition, the Barack Obama could “end up siding with Argentina” in an “unusual move” that will get the White House involved in the legal row before the US Supreme Court “asks it to.”

Forcing sovereign nations to repay their overdue debts is a controversial topic in the developing world and in the halls of US government agencies. Bondholders who buy defaulted debt at a discount are often derisively called “vulture capitalists” for trying to profit from the financial woes of struggling nations.

“A 10-year legal and lobbying battle that pits a prominent Republican campaign donor against the government of Argentina has drawn the attention of the Obama administration, which may end up siding with Argentina,” the piece written by Tom Hamburger and Carol D. Leonnig affirms.

The Washington Post adds that the US Justice Department had already supported Argentina in its million-dollar battle with hedge funds NML –commanded by US billionaire Paul Singer- and Aurelius which, unlike 93% of Argentina’s creditors, refused to enter the country’s debt swap in 2005 and 2010.

The Obama administration must decide whether to back a foreign government against a group of U.S. hedge funds and other investors who bought Argentine debt, some of which was purchased at a steep discount after the country defaulted in 2002. Argentina says that if the case goes against the country, the investors stand to gain more than one billion dollars in profits.

Although the US Justice Department spokesman Peter Carr did not comment on the information, sources quoted in the article who allegedly took part in Friday’s meeting said the White House is considering what position to take in the long-standing dispute.

The bondholders’ lawsuit is called NML Capital v. Argentina, named after a subsidiary of Elliott Management, Singer’s hedge fund. The subsidiary paid 48 million dollars in 2008 to purchase Argentina’s debt and is now part of a group of 19 investors insisting that the country repay 1.44 billion, including interest, according to Argentina’s court filings.

Jay Newman, senior portfolio manager at Elliott, called the Argentine numbers “a complete fabrication” and said the country has a history of providing inaccurate economic statistics to the US government and others. The investors group declined to provide its own estimates.

In addition to filing their lawsuit, the bondholders have launched a global public-relations war targeting Argentina. Recent ads in The Washington Post and other newspapers depict Argentina as thumbing its nose at U.S. laws, providing a haven for narcotics traffickers and forming dangerous alliances with Iran.

The investors also are getting help from Congress. In a July 10 letter to Attorney General Eric H. Holder Jr., ten Republicans and two Democrats from the House urged the Justice Department not to side with Argentina in the case.

Furthermore the Argentine government’s decision against allowing a special prosecutor on an Iran related bomb attack in Buenos Aires to testify before the US Congress has not been the best of public relations.

Prosecutor Alberto Nisman collected a 500-page indictment on the bombing in 1994 of a Buenos Aires Jewish community centre killing 87 and injuring hundreds, and in his conclusions accuses Iran of masterminding the attack and of “infiltrating” regional countries to spread an “intelligence network”.

In a letter personally addressed to Argentine President Cristina Fernandez US lawmakers expressed disappointment over the veto of Nisman’s visit to the US Congress and questioned the “authenticity” of her administration’s intentions to probe the 1994 AMIA attack through the Memorandum of Understanding recently reached with Iran.

However after former NSA Edward Snowden leaked sensitive information about US surveillance in Latam including Brazil and Argentina, the dice again favour Cristina, but Congress also has a memory.

 

31 comments Feed

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1 Troneas (#) Jul 15th, 2013 - 12:30 am Report abuse
you dont have to be a great philosopher to realise how immoral it sounds to buy something for 48 million and pretend to forcefully sell it back for 1.44 billion. capitalism has a lot going for it but this is one of its ugly facades. at the end of the day, its the common joes' who pay up this difference so that this gentleman can add another billion to his bank account. of course, everyone here will realise this but will bash argentina to no end regardless because that is what posters do here.
2 Captain Poppy (#) Jul 15th, 2013 - 01:38 am Report abuse
Personally.....I agree with you. However it is not illegal to continue this practice. There should be something in place to remedy the current state at an international level. However, Argentina, overwhelmed by debt from it's own actions should not have been the ones dictating to the creditors terms of re-negotiations. At the very least it should have been bi-lateral and not uni-lateral. This attitude that they took.....“if you want anything this is how it is going to happen” caused them to be in the situation that they now find themselves. They should have known that there are no bankruptcy protections for a country and they should have known that the debt will never go away......not ever.
3 Think (#) Jul 15th, 2013 - 01:40 am Report abuse
TWIMC

Article says...: “US could end siding with Buenos Aires’ says Washington Post”.....

US should end siding with Buenos Aires..., I say.
4 Captain Poppy (#) Jul 15th, 2013 - 01:53 am Report abuse
We agree.....WTF!
5 Troy Tempest (#) Jul 15th, 2013 - 03:33 am Report abuse
If they ever pay anything, it will still only be 30% of what they borrowed from others - 60-70 billion $$$ loss to the creditors, nothing lost for Argentina - they got their money, actually somebody else's.
6 danvan (#) Jul 15th, 2013 - 03:37 am Report abuse
As unpalatable as they are, these funds do play an important role in the liquidity of the bond market. If it were known that sovereign funds could default without recourse, then countries could make cynical applications or simply claim victimhood to the last bad administration/IMF/World Bank.

The terms of the loan were know and so was the jurisdiction.
What annoys about this case is that Argentina can pay, and the administration who agreed the loan was Peronist, just like the current one.
One of Peronisms stated objectives is freedom from foreign influence. Fine. Don't raise capital on the international market and be self-financing through your superior economics.
7 God.Is.An.Illusion (#) Jul 15th, 2013 - 08:47 am Report abuse
What else is new.
8 Troneas (#) Jul 15th, 2013 - 09:29 am Report abuse
@2. yet if the creditors thought that argentina's terms were that unjust, they would have gone to the courts, just like mr singer did. yet 93% accepted the swap. and its debatable whether argentina contracted debt solely due to its own actions. its no mystery that the world economic landscape of today and especially of the 90s benefits mostly the developed world. they dictate the rules, they have the money to subsidise and innovate. developing countries' strength lies mostly on agriculture but alas, there is no real free trade there is there? for the record i dont like this government, but i support 100% their strong stance against these vulture funds. heck this mr singer doesnt even pay tax. he lives in the cayman islands sitting on his billions of dollars so that he can evade US tax. and i never said what they are doing is *illegal*, its just downright immoral.
9 darragh (#) Jul 15th, 2013 - 10:44 am Report abuse
I don't pretend to be an economist or even to understand the basics but I do know that if I borrow 10,000 euros from my bank then go back 3 years later and say 'sorry, because of world economic fluctuations I am only able to repay 500 Euros' they wouldn't say 'oh alright then we'll settle for that'. They'd say 'tough shit - sell your house'
10 Conqueror (#) Jul 15th, 2013 - 12:04 pm Report abuse
@1 Ever bought a secondhand car? What do you think car dealers do? They buy a vehicle in at, say, £100 and the next thing you know it's on the forecourt for £500! Pop down to your local store. Check out plastic items. The least little thing will probably cost at least £2. Probably cost 20p, including packaging to produce. If you want “immorality”, there is plenty around. How do you rate a country that issues bonds it never intends to pay out on?
@3 Yeah. But nobody cares what you say.
@7 Do tell us how you think that private citizens who had invested their savings and retirement pensions were going to enter into law suits against argieland? It was a case of “force majeur” on the part of argieland. I insist that this was part of argieland's calculations and strategy. Who was in charge when the first “restructuring” took place? That crook Nestor. Who was in charge when the debt exchange was “re-opened” in 2010? CFK. Now just think this through. In 2003, NK and CFK declared their net worth to be US$1.4 million. When NK died in 2010, their net worth was said to be US$14.1 million. Most of CFK's income has been declared to be from two hotels in Calafate. It has been reported that both hotels are usually empty. Now, NK's sons inherited 50% of his assets at the time of his death. And yet CFK's net worth has continued to increase. As of 2011, her net worth was declared as over US$16 million. Now talk about “immorality”. I would have to agree that she can't repay the debt all by herself, but just how much has she stolen? Incidentally, her presidential salary plus the pension she gets on account of him amounts to more than US$138,600 a year. I reckon she''s stolen around US$15 million. Talk some more about “immorality”. How much went missing while NK was governor of Santa Cruz? Talk some more about “immorality”.
@8 Can only agree. Shows the perfidy of argieland and that of the Ks and their cronies.
11 Steve-33-uk (#) Jul 15th, 2013 - 02:12 pm Report abuse
Latest from the RG realm of fantasy...

'Falklands: the risks of the anachronism -
Reader, know you that a few days ago took place for the annual meeting of the Decolonization Committee of the United Nations?
Most likely not; newspapers not dispensed him, this time, too much attention. These meetings have purpose to discuss cases between States members of the United Nations, considered to be colonial in nature. The Malvinas case was thus considered in the remote times of the 1960's, when the General Assembly issued the resolution 2065 on the subject.
Without the opposition of Britain at the time. In recent years, Argentine diplomacy has concentrated his artillery in the meetings of this Committee, leading to what he considers the support of the countries of the region to the official malvinera position: Great Britain to negotiate sovereignty and the Islanders do not have this art nor part...'
www.clarin.com/opinion/Malvinas-riesgos-anacronismo_0_956304482.html

'STEP: With a popular party, Lopez and Chaves launched the election campaign - ...“We know that it is not easy,” said Lopez, “but the strength and the strength of our convictions, sustains us, and so we have been showing as we could take back our country, and retrieve the integration of the great Latin American homeland, and how through this path will finish putting an end to colonialism and will finish recovering the full possession of all of our territories including Falkland Islands unlawfully usurped by British imperialism”...'
www.actualidadtdf.com.ar/index.php?option=com_k2&view=item&id=9679:paso-con-una-fiesta-popular-lopez-y-chaves-lanzaron-la-campa%C3%B1a-electoral&Itemid=84
12 MagnusMaster (#) Jul 15th, 2013 - 02:59 pm Report abuse
All I´ll say is that if you want Argentina to pay its debt, you should go and take it from Cristina´s house and Nestor´s tomb, that´s the only way our politicians listen.
13 ChrisR (#) Jul 15th, 2013 - 04:33 pm Report abuse
@1 & 8

It is clear you have no money to invest and equally clear that you misunderstand what happened with the 'new terms' that 93% accepted.

Those that accepted, almost exclusively, were banks and investment houses and guess who took the beheading (it certainly was not a 'haircut') for them: their customers. It did not cost the banks a penny (no surprise there then).

Of those left, the vast majority are small investors (though still more than you have ever invested most likely) who put their savings AND pension money into these argie investments. A great many were Italian families who thought that any doubts about the deal was OK because of the number of Italians in The Dark Country, they wouldn't screw their own citizens would they? Oh yes they would. All these people want is THEIR MONEY BACK.

And frankly your attitude is both naive and uneducated if you think that the holders of the bonds are immoral: it is Argentina who is now, and always has been, acting immorally.

I hope you never come into any windfall money because you would probably lose it and then bleat and whine and cry how it wasn't your fault, just like the argies.
14 bushpilot (#) Jul 15th, 2013 - 04:42 pm Report abuse
@1 Troneas “how immoral it sounds to buy something for 48 million and pretend to forcefully sell it back for 1.44 billion.”

“sell it back”!!

You are twisting the words here like a fork-tongued ferret. It isn't about what NML is doing, but what Argentina is doing. The correct phrase is not “sell it back” but, “PAY IT BACK” and that phrase has to do with Argentina, not NML.
15 God.Is.An.Illusion (#) Jul 15th, 2013 - 06:12 pm Report abuse
@10

Oh, I do agree with you.
But what CAN be done as long as the PEOPLE allow KFC in charge?

And what is the alternative?

I worked in BsAs in 1980/82 when changed only USD 10 per day .....
16 Briton (#) Jul 15th, 2013 - 06:28 pm Report abuse
If they did not borrow in the first place, they would not be in this mess,

ok-everyone borrows, but at least they pay back,

if poor old greece is forced to cut back, then argentina should be made to pay her debts,

as for interest, thats another story perhaps.
17 Troneas (#) Jul 15th, 2013 - 09:05 pm Report abuse
@10. And the reason i hardly post here anymore is in your reply. anything goes in this forum to make argentina look bad. you cannot compare the resale of goods to the resale of debt. come on man use your head. yes you can buy a used car and resell it for more - but you are not forcefully selling it back at a 1000% increase to its previous owner!! you can increase the price of a car all you like, but if there are no buyers, you are stuck with it. that doesnt work with debt.

as for the other posters who insist that debt *has* to be paid under the rules the bank or the creditors stipulate - you are wrong. of course money lenders will try at all cost to maximise profits on their lending, but every debt can and usually is renegotiated. i find it hard to believe none of you has had a familiy member, a friend or even yourselves in a situation where interest just became so absurd that even the bank is willing to cancel a debt at a lesser amount if they realise the initial debt skyrocketed to ridiculous levels. it happens all the time.
18 Conqueror (#) Jul 15th, 2013 - 09:30 pm Report abuse
@15 Let me tell you what COULD be done, in my opinion. The first thing is HONESTY. Despite the hopeful note sounded by Simon68 recently, I reckon when the major part of the population, including the “government”, decides to stop the lying and “something for nothing” approach, things might start to improve. What argies are coming up against is that economics pays no attention to lies. Sometimes it's possible to stave off some particularly nasty effects with some lies but, sure as eggs is eggs, economics will catch up and kick you where it hurts. Now take a look at this article: en.mercopress.com/2013/07/09/main-organized-labour-leader-calls-on-workers-not-to-vote-for-cfk-next-october Read down and you will get to this classic ”He added: “we tell the government and society that we are outraged because of this evil (income) tax that workers must pay” So how many countries do you know of where workers don't have to pay income tax? In the UK, you start paying income tax if your annual income exceeds £8,105. Are you going to say that argie workers are so poorly paid? Once you've got rid of the lying and accepted economic reality, you then pay your taxes and realistic prices for things. Most of all, whether it's the private citizen or the “government”, you don't just go out and borrow and keep your fingers crossed. When things are tough, you have to go for “austerity”. Most of all, you pay your debts. You don't cheat people. That gets you a good reputation. Then, when things get rough, people may be inclined to say that they'll give you longer to pay. Just take a look at the UK reconstruction debt of US$4.34 billion (=US$27 billion) to the USA was finally paid off on the last business day of 2006. That's 61 years. But there was no problem because the USA knew that the UK regarded it as a matter of honour to repay that debt. Now compare that to argieland's attitude towards its debts.
19 ChrisR (#) Jul 15th, 2013 - 09:47 pm Report abuse
17 Troneas
“i find it hard to believe none of you has had a familiy member, a friend or even yourselves in a situation where interest just became so absurd that even the bank is willing to cancel a debt at a lesser amount if they realise the initial debt skyrocketed to ridiculous levels. it happens all the time.”

PARDON?

Which parallel universe are you living in? That comment alone proves my original points: argies cannot be trusted and think they should be forgiven the interest that the lender is RIGHTLY entitled to under the agreement THEY signed.

Just when are the Peronists going to come into the 21st century instead of living in the 'golden years' of Peron (as we have been told by someone who was not even alive then)?
20 Conqueror (#) Jul 15th, 2013 - 10:24 pm Report abuse
@17 No-one has to do much to make argieland look bad. It IS bad. I'll give a slight break. You've been poorly educated. Here's a thought. When the argie “government” issued those bonds, it gave certain assurances. All that is now being required is for argieland to comply with those assurances. Fortunately, the assurances were given under New York law. But then, if they'd been given under argie law, no-one would have bought the bonds. You say “anything goes in this forum to make argentina look bad”. I say that you'll come out with anything to try to excuse your crimes. And argieland has committed many crimes.
And I don't believe anyone has insisted that “debt *has* to be paid under the rules the bank or the creditors stipulate”. What has been stated is that it is a matter for negotiation. But there was no negotiation. Argieland told bondholders what it was prepared to do. No negotiation. Take it or leave it. Rather naturally, people who were faced with a choice of losing everything or recovering something, chose the latter. Like it or not, you will have to accept that argieland is basically “bent”. No honesty, no integrity, corruption, criminality, larcenous, mendacious. Argieland. Oh, and I nearly forgot, genocidal war criminals! Just think how generous Britain has been. No demands for reparations. Or war criminal trials under UK jurisdiction.
21 The Truth PaTroll (#) Jul 16th, 2013 - 01:32 am Report abuse
@20

Probably because there were no war crimes committed against neither the British troops nor the Falkland Citizens. If you will next suggest there were war crimes, then not only will you be cheapening the definition of true war crimes, but also then admitting the UK has done just as bad and WORSE in Iraq, because what has been uncovered there is far worse than anything ever done in the Falklands.
22 God.Is.An.Illusion (#) Jul 16th, 2013 - 07:47 am Report abuse
Bravo!
23 Simon68 (#) Jul 16th, 2013 - 04:00 pm Report abuse
19 ChrisR (#)
Jul 15th, 2013 - 09:47 pm

Chris, Troneas' problem is that he/she is thinking in an Argentine context, i.e. 25% inflation the norm, so interest rises to enormous heights!!!!!!

18 Conqueror (#)
Jul 15th, 2013 - 09:30 pm

There is a problem with the translation of “impuesto a las ganancias”, MercoPress translates it as “income tax” whereas it is really “profits tax”. At the moment in Argentina, and obviously to allow the kirchnerite rabble to profit, there is no tax on income from financial investments, but the average worker is paying 8.3% of his anual salary in tax plus 21% VAT on almost everything he buys plus sales tax at around 6% and finally inflation whacks him for between 2 and 4% per month!!!!!!

I think the Argentine working person is probably one of the highest taxed individuals in the world today!!!!!!
24 The Truth PaTroll (#) Jul 16th, 2013 - 04:08 pm Report abuse
Well, we are paying for the debt of the prior generations, at some point you gotta pay... either up front or under the guise of monetary inflation to lower debt levels.

What you see in Europe and the USA with tax increases and benefit decreases is just the beginning. One analyst (Jim Rogers) said that so far only 5% of the tax increases and budget cuts NEEDED to pay down the debt of the USA and Europe have gone through... and look at the misery, rioting, and economic malaise that 5% has already caused.

The Europeans and North Americans will have to pay their 30+ trillion in debts, and it won't be pretty. Either they will be taxed to death, or defaults will ensue with massive inflation. I bet on the latter.
25 Simon68 (#) Jul 16th, 2013 - 05:57 pm Report abuse
Tobias, don't be silly, the US and the UK ARE paying their debts, they've been paying them all along, it is only twits like us that take out international loans then allow our representatives (de fact military and/or civilian or democratically elected) to steal the money and then have to pay it back out of OUR pockets!!!!!!!!!
26 Captain Poppy (#) Jul 16th, 2013 - 06:18 pm Report abuse
#24 tobi.....Argentina is paying it back in one form of another. Ask yourself why no lemons and beef?
27 God.Is.An.Illusion (#) Jul 16th, 2013 - 06:54 pm Report abuse
My BRAVO refers to @19
28 wesley mouch (#) Jul 17th, 2013 - 01:49 pm Report abuse
CFK and Obama are two peas in a pod: totalitarian thugs. Singer is targeted because he is of the wrong political party. American politics have become that of a third world country. What this says is two things: The rule of law no longer exists in the USA and there is diminishing respect for property rights. Also it means that Sovereign debt obligations will likely not be honored even from the developed world.
29 Captain Poppy (#) Jul 17th, 2013 - 05:52 pm Report abuse
make your case that the rule of law no longer exists in the USA? Respect for property rights? People have rights not property. This is what one expects from being outside looking inside. At any rate state your case.....for totalitarian Obama? I loath him but he is far from a totalitarian.......lol
30 DanyBerger (#) Jul 19th, 2013 - 08:50 pm Report abuse
@Simon68

You are absolutely wrong nor US or UK is paying their debt because they are refinancing and paying interest as they can.

That is the reason their debts are growing, growing and growing...

They have huge deficits like a business that expend more of what earns.
When the problem is circumstantial in a business lets say you got 1 or 2 months having your sales decreasing you ask to your bank a loan and keep going when you turn numbers into blue again you can pay the debt back without problem, etc.

But if your business always produce loses you have to keep asking money to keep going on.

When your debt reach certain level of your assets bankers start to get worry and in one point they will refuse to lend you more because your business has not viability for them and you will be not able to pay them back.

UK is a business that is producing loses from decays and just the external debt is 5 times bigger than the whole sale in a year. And had to keep borrowing to keep going.

Their bankers seem to not realised that they are not going to pay until one day someone will realise that and the running financial bicycle will crash.

So in the end they will end like “Drestroy city”...
31 A_V0ice (#) Jul 21st, 2013 - 11:38 pm Report abuse
Dani.....you are so sexy when you get worked up. Do you only go half breeds or Euro descendants? I bet your mouth is more talented than just talking........I can tell you are quite the man's man. Do you leave your key hanging on your back door for visitors? I sure would love to come in and visit.

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