Consider what happened to Congo. The hedge fund Kensington, a subsidiary of the distressed debt investor Elliott Management, purchased defaulted Congolese debt for cents on the dollar in the late 1990s. In 2005, Kensington managed to intercept the Nordic Hawk, a tanker ship carrying $39 million in oil, and proved to a British judge that the oil originated in Congo, despite elaborate efforts by Congolese government officials to disguise the source of the ship’s cargo

Such measures are typically justified by portraying the legal consequences of a default with a parade of horribles. Consider what happened to Congo. The hedge fund Kensington, a subsidiary of the distressed debt investor Elliott Management, purchased defaulted Congolese debt for cents on the dollar in the late 1990s. In 2005, Kensington managed to intercept the Nordic Hawk, a tanker ship carrying $39 million in oil, and proved to a British judge that the oil originated in Congo, despite elaborate efforts by Congolese government officials to disguise the source of the ship’s cargo


Litigation would surely take a long time. Congo defaulted on its external debt in 1985, but did not reach a settlement with Kensington until 2008. Similarly, Argentina managed to evade creditors like Elliott Management for over a decade before ultimately reaching an agreement to pay only 75 percent of the amount owed. Judge Thomas P. Griesa, the United States District Court judge handling the case, frustrated by Argentina’s decade-long intransigence despite a strong economic recovery post-default, ultimately forced Argentina to pay, but also quickly extricated himself from the case once Argentina had made a reasonable offer.