Quickly following Puerto Rican debt being thrown into bankruptcy after a settlement could not be reached, bond investors are looking to challenge the move in court. Argentina’s debt woes may come to mind as a precedent, but this time it’s different, says a sovereign debt expert.
Argentina’s historic battle over defaulted debt
The Argentine debt battle was one for the history books. After the country defaulted on its bonds and then reached a settlement with investors who agreed to accept less than face value, opportunistic hedge funds bought the debt for a fraction of the cost. Firms such as Elliott Management then proceeded to demand payment in full.
When Argentina would not cede to their demands, Elliott and other bond investors took the unusual step of attempting to go to court and seize the nation’s assets, including attempting to take control of an Argentine naval vessel, the Libertad. This came after a separate investor group attempted to appropriate the president’s private plane – with her inside. The aggressive tactics led into the courtroom, where bond holders were ultimately victorious, forcing Argentina to agree to their terms through a negotiated settlement.
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