Report: Billionaire GOP Donor Forces Argentina to Default
Debt collectors can be brutal, as many U.S. consumers have learned. Over the past couple of years, these agencies have swooped in like vultures, eager for whatever scraps they can pilfer from Americans still struggling to claw their way out of debt.
Now, these vultures have set their sights on the entire country of Argentina. Here again, the fact that Argentina and its people are unable to pay seems not to concern the billionaire Republican donor, who seeks to almost single-handedly pull the rug out from underneath an entire economy.
Our Miami debt collection defense lawyers understand that Paul Singer, a hedge fund conservative with Elliot Management who donated millions to the campaigns of Mitt Romney, George W. Bush and Swift Boat Veterans for Truth, is dead-set on collecting this money. It’s not because he needs it. Rather, according to various media reports, it’s based on his deeply-held conviction that those who owe money should always pay it back. The New York Times called the hedge fund head a “relentless foe” of the Argentinian government.
The reason why the government of Argentina, one of the wealthier South American nations, defaulted is a complex story. But basically, it boils down to this: In 2001, the country found itself treading water in the midst of an economic depression. As a result, it forced the majority of its creditors to take a loss on loans issued to the country.
For most of those who extended the loans, this was better than not receiving anything at all. However, there were a handful of investors – the Elliott Management hedge fund among them – who refused to take this lesser amount. They demanded the Argentinian government fork over the full amount, plus interest.
It’s a battle they’ve been waving ever since, mostly in the U.S. federal court system.
Two years ago, a federal judge for the Southern District of New York, ruled that the country couldn’t continue to pay other bondholders who had agreed to less if it refused to pay Elliott and the handful of other holdouts. Further, the judge ruled any banks acting as middlemen between Argentina and the other firms would find themselves facing legal trouble.
The decision was a controversial one, and the judge was derided in many circles as having “not completely understood the bond transactions.” However, an appellate court affirmed his decision. Then, the U.S. Supreme Court in June declined to hear the appeal from Argentina. That meant the federal district decision stood, and the only thing left for Argentina to do was negotiate.
However, talks among Elliott’s executives and the Argentinian government broke down in New York, which led to Argentina not making good on a scheduled $563 million bond payment, as had been ordered by the court. Now, the country is in default.
It’s worth noting that Elliott purchased the bonds at well below market value, and will likely make a great deal of profit by having the bonds paid back in full, with interest. The face value of the bonds was around $170 million, though investors with the hedge fund are now seeking to recover $1.5 billion, which includes the interest.
Of course, never mind that such a payment could force the country of 41 million people with a fragile economy back into another financial crisis that could result in a sharp rise in poverty and unsettle countless global markets. According to Singer, it’s about the rule of law and the strict enforcement of it. We’re sure it has nothing to do with the hundreds of millions of dollars his firm stands to profit.
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