Brazil, France, Mexico Team Up With Argentina In Battle With Elliott

Paul SingerBy World Economic Forum (Flickr: The Global Financial Context: Paul Singer) [CC BY-SA 2.0], via Wikimedia Commons

As default of sovereign debt becomes a growing realistic possibility among numerous nations, establishing legal precedent in Elliott Management’s fight with Argentina appears to be a more pressing concern of fellow sovereigns. 

Three sovereign governments – France, Brazil and Mexico – will file amicus curiae briefs with the U.S. Supreme Court supporting Argentina’s appeal of a lower court decision, according to a report in Fin Alternatives.

The dispute between the government of Argentina and Elliott dates back to the country’s 2001 default on $80 billion in privately held debt. In 2005, several years after the default, the Argentina government offered bondholders, 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.

“Violation of sovereign immunity” claims Argentina

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 Elliott dates back to the country’s 2001 default on $80 billion in privately held debt.  Argentina is arguing that the rulings violate its sovereign immunity and could complicate future debt restructurings so as to favor bondholders, a concern of the three sovereign countries but an issue that impacts most of the world’s government bond insurers.  The US, however, is not anticipated to back Argentina when it appears in court.

Elliott charges Argentina with scoring political points but vanquishing the rule of law

“When a country such as Argentina thinks that it can save money and score political points with its citizens by eschewing the rule of law and paying whatever it wants to pay, to whomever it wants to pay it, and whenever it feels like paying, the inevitable result is that the society is harmed and ultimately impoverished to a much greater extent than any benefit derived from its defiance,” Paul Singer said in a letter to investors dated December 31, 2013.  “Those citizens who are most ardent about the populist flavor of their government’s lawless behavior usually experience the greatest suffering in the aftermath.”

Attempts by Elliott to seize assets get personal with Argentina’s president

The war between Elliott and Argentina is nothing new. In addition to attempting to seize the plane of Argentina’s president, Cristina Fernandez de Kirchner, during a fueling stop, it impounded an Argentine Navy vessel.  Elliott has been fighting the Argentine government in court in a battle over its fund’s $2.5 billion exposure.



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