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

Sunday, July 14th 2013 - 23:53 UTC
Full article 31 comments
Billionaire Paul Singer is also a prominent Republican campaign donor 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 Forcing sovereign nations to repay their overdue debts is a controversial topic admit the US State and Justice Departments

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.

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.

 

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  • Troneas

    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.

    Jul 15th, 2013 - 12:30 am 0
  • Captain Poppy

    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.

    Jul 15th, 2013 - 01:38 am 0
  • Think

    TWIMC

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

    US should end siding with Buenos Aires..., I say.

    Jul 15th, 2013 - 01:40 am 0
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