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http://nypost.com/2014/06/12/how-one-hedge-fund-titan-could-bankrupt-argentina/

How one hedge fund titan could bankrupt Argentina


On the surface, the 11-year-old battle between one 69-year-old New York hedge fund mogul and Argentina seems hardly fair — especially when several other countries joined the fight and lined up alongside the South American country.

But today, that person, billionaire investor Paul Singer, head of Elliott Management, could get closer than he’s ever been to taking down an entire country.

The US Supreme Court met Thursday to decide if it will accept Argentina’s appeal of a lower court decision that it must pay Singer roughly $1.4 billion on bonds the country defaulted on 13 years ago. A decision is expected to be announced on Monday.

Eventually, Singer stands to collect more than $3 billion on bonds with a face value of about $630 million.

While most holders of the bonds agreed to a steep haircut when Argentina restructured its debt, Singer, who paid about 22 cents on the dollar for some of his bonds, refused — claiming he had the right to hold out for the entire amount. Others would latch on to Singer’s legal fight.

Two separate US courts would later agree with Singer.

Argentina now claims the amount due all the holdouts, with interest, is about $15 billion — more than half of the country’s entire $28 billion in reserves. The country’s gross domestic product in 2012 was $475 billion.

If the Supreme Court rejects Argentina’s appeal outright, then lawyers for the country wrote in a recent confidential memo that it could consider defaulting on all its debt so it could avoid paying Singer — whom Cristina Kirchner, the country’s president, has called “a vulture.”

Here are the highlights of Singer’s 11-year struggle.

Oct. 19, 1994: Argentina enters agreement with Bankers Trust to issue sovereign debt in New York in what will ultimately total about $82 billion. President Carlos Menem’s embrace of privatization promises reform and attracts foreign investment to keep the government afloat.

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Former Argentina President Carlos Menem with his wife, Cecilia Bolocco, in 2003Photo: AP
Dec. 26, 2001: Following a deep economic crisis triggered by troubles in Russia, Brazil and even the US dot-com crash, Argentina defaults on the $82 billion. It’s the largest sovereign default in history. The economy contracts by almost 30 percent and about 50 percent of Argentines are poor.

April 10, 2003: Paul Singer’s Elliott Management hedge fund, using a secret Caymans Island fund called NML Capital, files the first of several claims against Argentina seeking full payment on Argentine bonds it purchased shortly before and after default. By 2008, Singer’s purchases of defaulted bonds would total around $900 million, including interest that varied from 9.75 percent to 12 percent.

Jan. 14, 2005: Under newly elected President Nestor Kirchner, Argentina begins restructuring the debt. About 76 percent of the bondholders agree to accept new bonds worth 25 to 35 percent of the old ones. In 2010, another debt exchange — with terms sweetened by warrants tied to the economy’s growth — encourages another 17 percent of bondholders to sign on. Holdouts now account for only 7 percent of bondholders.

2005-2008: Singer obtains several judgments against Argentina, but the country refuses to pay him or the other holdouts more than those who accepted the haircut, and claims sovereign immunity. A global search for Argentine assets by Singer begins. In one of his boldest moves, Singer tries to attach Argentina’s dollar reserves held at the Federal Reserve Bank of New York. Singer also finances a lobbying group, “American Task Force Argentina,” to enlist Congress to get his money from Argentina. Singer-supported senators introduce legislation to that effect, but the effort goes nowhere.

February 23, 2012: Frustrated by Argentina’s recalcitrance, a Manhattan federal judge sides with a new Singer argument that the country must pay him and other holdouts the original, higher payments whenever it makes the lower payments to the bondholders who agreed to the haircut.

Oct. 4, 2012: Singer convinces the government of Ghana to seize an Argentine military ship, the ARA Libertad, when it arrives in port in the African country. Singer seeks to take the ship to satisfy a portion of its claim. After being held for two months, the ship is ordered released by the International Tribunal for the Law of the Sea, a UN court.

Oct. 29, 2012: A federal appeals court upholds the lower court order. Argentina President Cristina Kirchner — who took over from her husband in 2007 — vows to never pay “one dollar to the vulture funds.” Some $1.4 billion is now at stake in this case. But fear of default on the nearly $30 billion in restructured bonds roils the market. After some skirmishing, the court reaffirms its order on Aug. 24, 2013.
Feb. 18, 2014: Argentina asks the US Supreme Court to take its case. Argentina says total holdout claims, with interest, now come to $15 billion — more than 50 percent of its $28 billion in reserves. Singer’s total claims are estimated to be more than $3 billion. France, Mexico and Brazil support Argentina. Singer lines up Italian investors and some retired federal judges to back him.

June 12, 2014: The Supreme Court holds a conference to consider Argentina’s petition. There are three possible outcomes. First, it could take the case. Second, it could put the request on hold and ask the US Solicitor General for its opinion. Lastly, it could deny Argentina outright. Argentina’s lawyers have advised the country that its “best option” in the case of an outright denial could be to default on the exchange bonds, then restructure them “outside of the reach of American courts.” Such a move could hurt the country financially.