Argentina Expected To Appeal Pro-Elliott Ruling Today

Argentina

Argentina’s long-standing fight with activist hedge fund manager Paul Singer’s Elliot Capital Management might be taken to the Supreme Court.  Today, the deadline for a court filing could pit Argentina and its legal representative, Paul Clement, who represented the U.S. government before the high court in George W. Bush’s second term, against Elliot, whose legal representative is Theodore Olson, who represented the U.S. government in Bush’s first term.

Appeal expected to Supreme Court today

Argentina is expected to appeal lower court decisions, which ordered it to pay bondholders after the 2002 default.  The dispute between the government of Argentina and Elliot 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.  Elliot, who has a long history of confrontation with Argentina over default on its debt, including attempting to repossess the Argentine president’s plane as it was refueling, has termed the Gramercy-led solution “beyond bizarre” and “impractical” in a letter to investors. As a result of default, Argentina’s peso dove in value relative to the U.S. dollar.  In 2000 the peso was near par to the dollar but currently it takes eight pesos to trade for one dollar.

Argentina has engaged in what could be construed as a personal battle with Elliott.  As reported in ValueWalk, when Elliott criticized Argentina for its ties with Iran, the sovereign nation lashed out at the hedge fund manager.  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.

Lower court rejected Argentina’s rehearing bid

Last year the Supreme Court refused to take the case while the U.S. Second Circuit Court of Appeals was still considering it.  Then last month, after the case reached a conclusion, the Supreme Court agreed to hear Argentina’s appeal of subpoenas issued by Elliott about the country’s assets.

The U.S. Second Circuit Court of Appeals had rejected Argentina’s bid for a rehearing and earlier in the year the court affirmed lower court rulings that ordered Argentina to pay the bondholders. As the threat of another government default swirls around Argentina, the court order bars the South American nation from making payments on its restructured debt without paying the bondholders first. Argentina has refused to pay the bond holders, calling Elliott and his fellow bondholders “vulture funds” because they refused to accept previous offers at a discount.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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