Link bait title - the ship was seized in Ghana by a court-ordered injunction. Highly unlikely that the investors walked on the boat.
Nevertheless, really interesting. In general, we expect a debt holder to try to seize assets after the loan defaults. But I've never heard of a private investment group going after a government.
Here is the response from the Argentine government:
The vulture funds have crossed a new limit in their attacks on the Argentine Republic. The Frigate Libertad has been held in the Republic of Ghana over a recourse presented by NML Group before the courts of that country. The Argentine Foreign Ministry has already taken steps with the African nation’s government to clear up the deception that the unscrupulous financiers have mounted. That measure is in violation of the Vienna Convention on diplomatic immunity.
The vulture fund NML has its headquarters in the Cayman Island, a fiscal lair that it’s worth recalling is a colony of Great Britain, from which those who don’t submit themselves to the laws of any jurisdiction operate and they’ve been denounced both by the G-20 and the United Nations.
The NML Group belongs to international speculator Paul Singer and he is the main financier of the lobby that operates in the courts and the Congress of the United States with the name “ATFA” (Task Force Argentina) to damage our country. Also, they disseminate false information for the use of some Argentine monopolistic press media, with the goal of extorting Argentina in order to obtain usurious profits from buying Argentine bonds for pennies during the 2001 crisis and refusing to join the 93% of the investors that agreed to the debt restructuring.
That group of lobbyists are the same that tried to harass the President during her recent trip to the United States passing out aggressive fliers against the presidential investiture. Another of its actions was to place a gigantic rat in the doorway of the Argentine embassy in Washington when the anniversary of our independence was being celebrated.
The Foreign Ministry reiterates that it is the decision of President Cristina Fernández de Kirchner to not bow before the international and local attempts at extortion that have been brought forth by the vulture funds and will continue to denounce them in various forums such as the G-20, the United Nations, CELAC, UNASUR and MERCOSUR, FATF and the other multilateral organizations.
The Argentine government is getting desperate at the moment. They've started fiddling their inflation figures, [1] and they've had to take steps to stop people converting all their savings into dollars. On top of that, they've added in some populist sabre rattling over the Falklands to try and distract everyone.
"I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody"
-James Carville
This ain't no vulture fund; and we all know about Argentinian "diplomacy".
This fund invested in Argentina, because it believed in its economy - it went long. Like many other funds who invest in US treasuries, German bunds, JGBs, etc.
We all know the Argentinian government is no example for a well-run government, and this fund is taking a stance (i) against the mal-practice/mis-management of the Argentinian finances, and (ii) not accepting a smash-and-grab of 30 cents on the dollar settlement.
All this fund is doing is collecting its debt. It just happens that one of the assets it is after is pretty unique.
Clarifications:
If a country/company defaults != investors do not automatically agree to settle at e.g. 30c/$ (investors need to agree to a settlement price, and in a large syndicate a minority group of investors will never settle or will settle at a higher price). If an investor doesn't settle, it has every right to claim 100c/$ + interest. Some comments imply otherwise.
Going long is no different when buying at 101 cents on the dollar or 1 cent on the dollar - e.g. Greek 10Y bonds are currently being sold/bought at 20c/$, that is no "vulture activity" but providing liquidity to the market. If there are no buyers the Greek bond (or any other bond for that matter) would technically collapse to zero. Some comments imply otherwise.
"Sedov has regularly been targeted by unpaid creditors of the Russian Federation such as Nissim Gaon (of now defunct Swiss group NOGA, an anagram of Gaon) and also by French holders of defaulted Russian bonds; in 2002 Sedov was forced to precipitously and unexpectedly leave Marseilles in the dead of night[1] to avoid being served a writ by AFPER (French association of holders of Russian Empire bonds) the following morning.
For over a year French holders of defaulted Russian bonds have been warning they were going to reorganize and export their claim to Anglo-Saxon jurisdictions, more friendly to private citizens than the French."
I was curious AFBER because of the Russian Empire thing. It is indeed the association of holders of Tsarist Russian bonds. They are trying to get paid back two successor governments and 100 years later.
I've got some experience with this, from being in the industry.
Not surprising most of these distressed debt funds are managed by lawyers and bond traders. They started in earnest in the early 80s when "junk" bonds became the latest trading fad.
The traders saw that they could buy up this debt cheap as most banks wanted it off their books and the lawyers figured that they could negotiate better terms than the previous owners would.
These types of funds can provide valuable services in a number of ways:
- getting toxic debt off the balance sheet of other firms
- creating some liquidity for existing holders
- getting the most money possible for existing holders.
The downside is that if you are a target of one or more of these funds you'd better have better negotiators and lawyers than they do :)
Not surprisingly the returns on these types of funds tend to fluctuate a lot causing the industry to move to a few large funds and many small funds. The smaller funds tend to have out sized returns for a couple of years and then blow up spectacularly.
[+] [-] vm|13 years ago|reply
Nevertheless, really interesting. In general, we expect a debt holder to try to seize assets after the loan defaults. But I've never heard of a private investment group going after a government.
Here is the response from the Argentine government:
The vulture funds have crossed a new limit in their attacks on the Argentine Republic. The Frigate Libertad has been held in the Republic of Ghana over a recourse presented by NML Group before the courts of that country. The Argentine Foreign Ministry has already taken steps with the African nation’s government to clear up the deception that the unscrupulous financiers have mounted. That measure is in violation of the Vienna Convention on diplomatic immunity.
The vulture fund NML has its headquarters in the Cayman Island, a fiscal lair that it’s worth recalling is a colony of Great Britain, from which those who don’t submit themselves to the laws of any jurisdiction operate and they’ve been denounced both by the G-20 and the United Nations.
The NML Group belongs to international speculator Paul Singer and he is the main financier of the lobby that operates in the courts and the Congress of the United States with the name “ATFA” (Task Force Argentina) to damage our country. Also, they disseminate false information for the use of some Argentine monopolistic press media, with the goal of extorting Argentina in order to obtain usurious profits from buying Argentine bonds for pennies during the 2001 crisis and refusing to join the 93% of the investors that agreed to the debt restructuring.
That group of lobbyists are the same that tried to harass the President during her recent trip to the United States passing out aggressive fliers against the presidential investiture. Another of its actions was to place a gigantic rat in the doorway of the Argentine embassy in Washington when the anniversary of our independence was being celebrated.
The Foreign Ministry reiterates that it is the decision of President Cristina Fernández de Kirchner to not bow before the international and local attempts at extortion that have been brought forth by the vulture funds and will continue to denounce them in various forums such as the G-20, the United Nations, CELAC, UNASUR and MERCOSUR, FATF and the other multilateral organizations.
[+] [-] gadders|13 years ago|reply
[1] http://www.rssenews.org.uk/2012/02/economist-magazine-drops-...
[+] [-] cmdkeen|13 years ago|reply
[+] [-] molmalo|13 years ago|reply
[+] [-] antr|13 years ago|reply
This fund invested in Argentina, because it believed in its economy - it went long. Like many other funds who invest in US treasuries, German bunds, JGBs, etc.
We all know the Argentinian government is no example for a well-run government, and this fund is taking a stance (i) against the mal-practice/mis-management of the Argentinian finances, and (ii) not accepting a smash-and-grab of 30 cents on the dollar settlement.
All this fund is doing is collecting its debt. It just happens that one of the assets it is after is pretty unique.
Clarifications:
If a country/company defaults != investors do not automatically agree to settle at e.g. 30c/$ (investors need to agree to a settlement price, and in a large syndicate a minority group of investors will never settle or will settle at a higher price). If an investor doesn't settle, it has every right to claim 100c/$ + interest. Some comments imply otherwise.
Going long is no different when buying at 101 cents on the dollar or 1 cent on the dollar - e.g. Greek 10Y bonds are currently being sold/bought at 20c/$, that is no "vulture activity" but providing liquidity to the market. If there are no buyers the Greek bond (or any other bond for that matter) would technically collapse to zero. Some comments imply otherwise.
[+] [-] andyjohnson0|13 years ago|reply
Cashing in on the crash http://www.economist.com/node/9687782
Vulture funds – how do they work? http://www.guardian.co.uk/global-development/2011/nov/15/vul...
[+] [-] johnrgrace|13 years ago|reply
[+] [-] arbuge|13 years ago|reply
http://en.wikipedia.org/wiki/Sedov
"Sedov has regularly been targeted by unpaid creditors of the Russian Federation such as Nissim Gaon (of now defunct Swiss group NOGA, an anagram of Gaon) and also by French holders of defaulted Russian bonds; in 2002 Sedov was forced to precipitously and unexpectedly leave Marseilles in the dead of night[1] to avoid being served a writ by AFPER (French association of holders of Russian Empire bonds) the following morning.
For over a year French holders of defaulted Russian bonds have been warning they were going to reorganize and export their claim to Anglo-Saxon jurisdictions, more friendly to private citizens than the French."
[+] [-] 100k|13 years ago|reply
[+] [-] chollida1|13 years ago|reply
Not surprising most of these distressed debt funds are managed by lawyers and bond traders. They started in earnest in the early 80s when "junk" bonds became the latest trading fad.
The traders saw that they could buy up this debt cheap as most banks wanted it off their books and the lawyers figured that they could negotiate better terms than the previous owners would.
These types of funds can provide valuable services in a number of ways: - getting toxic debt off the balance sheet of other firms - creating some liquidity for existing holders - getting the most money possible for existing holders.
The downside is that if you are a target of one or more of these funds you'd better have better negotiators and lawyers than they do :)
Not surprisingly the returns on these types of funds tend to fluctuate a lot causing the industry to move to a few large funds and many small funds. The smaller funds tend to have out sized returns for a couple of years and then blow up spectacularly.
[+] [-] moron|13 years ago|reply
[deleted]