Paul Singer's Billion Dollar Hedge Fund Is Going to War Over $58,000
When it comes to hedge-fund manager Paul Singer’s defaulted-debt claims against Argentina, the billionaire has the law on his side.
Actually getting paid, however, is a different matter.
Snubbed by Argentina for more than a decade, not even his legal victories in U.S. courts -- or a second default that they triggered in July -- have been enough to compel the nation to repay the $1.7 billion it owes. That’s left Elliott Management, Singer’s $25 billion hedge-fund firm, to scour the world for any seizable asset, large or small, that it can find.
The latest turn in the saga revolves around Argentine accounts in two banks in Belgium, which Elliott is now targeting. Argentina says the accounts, which the hedge fund’s NML Capital unit had frozen, according to a person with knowledge of the matter, hold a combined 52,000 euros ($58,037).
“They don’t hold any real chances of seizing these funds,” Patrick Esteruelas, a sovereign analyst at EMSO Partners, said from New York. It seems that “the real strategy is to put their boot on Argentina’s neck and leave them with as little leeway as possible.”
NML, which declined to comment, said in a May 7 statement that “in the absence of a negotiated settlement, our recourse includes locating and attaching Argentine assets wherever we can find them.”
Abusive Conduct
Argentina’s Economy Ministry said the same day that it’s taking steps to stop litigants from “abusive conduct.”
Whether Elliott’s strategy is working is open to debate.
Economy Minister Axel Kicillof says Argentina will never pay creditors who didn’t accept the terms of debt restructurings in 2005 and 2010 and have labeled those like Elliott, who pressed their claims in court, as “vultures.”
He also said the sale of $1.4 billion of 2024 bonds last month makes the country’s need to borrow in overseas debt markets less urgent. Argentina hasn’t borrowed internationally since its $95 billion default in 2001. The government paid 8.96 percent on its April 21 offering, almost double the average borrowing cost for Latin American issuers.
The sale “provides some breathing room but it is not a sustainable source of external financing,” wrote Siobhan Morden, the head of Latin America fixed-income strategy at Jefferies Group LLC, in a May 6 report.
Bonds Falling
Argentina’s restructured bonds due 2033 have fallen 6 cents from a high on April 13 on speculation that Argentina and holdout creditors will fail to resolve their legal dispute in the first months after a new administration takes over in December.
Bonds deepened their decline yesterday after hedge fund Aurelius Capital Management, which is also demanding full payment on defaulted debt, said it’s seeking to block payments on the 2024 notes. The 2024 bonds are down 0.5 cent to 97.6 cents on the dollar.
With Buenos Aires Governor Daniel Scioli, an ally of President Cristina Fernandez Fernandez, leading most polls and few signs of an economic collapse before Oct. 25 elections, investors have reduced bets of a quick solution. Even Jay Newman, a fund manager at Elliott, said in an April 30 interview that investors are being too optimistic of a settlement.
NML asked Belgium’s judicial system to freeze Argentina’s accounts a week after its April 21 bond sale, according to a person familiar with the situation, who asked not to be identified because the information isn’t public. The hedge fund didn’t have a specific target on how much it would be able to seize and is now seeking additional information on the accounts to determine whether it can grab those assets, the person said.
Trying to seize assets is nothing new for Singer.
Navy Vessel
His fund managed to seize an Argentine Navy vessel for more than two months in Ghana before an international tribunal ordered the boat released in January 2013. Elliott used similar strategies to get Congo and Peru to pay their defaulted debt.
Following that incident, Fernandez paid $880,000 to hire a plane to fly to Indonesia so that her presidential jet, the Tango 01, wouldn’t be at risk.
The hedge fund also said last year it’s investigating whether Argentina allegedly funneled money into accounts in Nevada, the Bahamas, Uruguay, Liechtenstein and Switzerland.
“It’s NML’s job to find any possible way to go after Argentina,” said Alberto Bernal, the head of research at Bulltick Capital Markets in Miami. Meanwhile, “the market sees a near-zero chance of them being successful.”
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