It’s difficult to determine if activist hedge fund titan Paul Singer of Elliott Management has a smile on his face as he toys with the nation of Argentina, but his recent lawsuit against the nation’s aerospace plans have those in the hedge fund world snickering.

Elliott management Paul Singer

Activist hedge fund Elliott seeks to seize Argentina’s satellites

NML Capital Ltd, a unit of Elliott Management Corp., is suing Argentina in California to seize two satellites the country is planning to launch into space. Elliott is operated by activist hedge fund manager Paul Singer. According to court documents, Argentina purchased two contracts for satellite launches in 2015 and 2016 from Space Exploration Technologies Corp.  NML is arguing the contracts are commercial property and thus not protected by sovereign immunity laws in a bid to claim a $1.7 billion settlement the hedge fund was previously awarded by a US court.

Dispute dates back to bond default, has implications for all debt issuers

The dispute between the government of Argentina and Elliott dates back to the country’s 2001 default on $80 billion in privately held debt. After defaulting, in 2005 the government offered bond holders, including Elliott, a deal worth approximately 27 cents on the dollar with upside tied to future growth. 

Nearly three quarters of investors took the deal, but Elliott was among the holdouts and Argentina has vowed not to re-issue the offer.  A small group of hedge funds, led by NML Capital, fought Argentina in court for full payment.  NML Capital and its group won a $1.3 billion award plus interest when the U.S. Second Circuit Court of Appeals found with the hedge fund titans.  Argentina has appealed the ruling to the US Supreme Court. 

“Given that Argentina has systematically refused to pay its judgments, obey U.S. court orders, or even talk to its creditors, this effort to enforce judgments against Argentina is right and necessary, and we look forward to presenting our case,” NML’s attorney Robert Cohen of Dechert LLP was quoted as saying in a Wall Street Journal report.

The legal case has reverberations for all sovereign governments issuing debt, as the outcome could limit options as governments that have failed to balance their budgets could lose default options if Elliott prevails in court.

Previous attempts to seize assets

Bondholders attempting to seize Argentina’s assets is nothing new, and at times has the surreal feel of a reality show where cars are being repossessed in dramatic fashion. In an attempt to reclaim money the Argentine government owes them after defaulting on its bonds, two wealth Italians who held Argentine bonds, Michael Colella and Denise Dussault, attempted to repossess the Argentine president’s plane in 2007 as it was refueling in the US.  But this was trumped by Elliott Management, which attempted to impound an Argentine Navy vessel at one point.

Argentina’s President Cristina Fernandez de Kirchner called the Elliott campaign “unscrupulous” and “libelous,” blasting the hedge fund for the media campaign as “blackmail” of the country.