Jump to content

User:Oceanflynn/sandbox/Vulture funds in Argentia

From Wikipedia, the free encyclopedia

Vulture funds in Argentina


Vulture funds

[edit]
Main article: vulture fund

A vulture fund is a hedge fund or private equity fund that invests in debt considered to be very weak or in imminent default, known as distressed securities.[1]

Sovereign debt collection was rare until the 1950s when sovereign immunity of government issuers was restricted.[2]

1957 The Federal Reserve froze Brazil's gold reserves.[3]


1972 Kansas City, Missouri-born Judge Thomas Poole Griesa (1930-) was nomonated as federal judge for the United States District Court for the Southern District of New York[4] by Richard M. Nixon on June 15, 1972 and confirmed by the United States Senate.


1978 In 1978, Griesa issued an order holding United States Attorney General Griffin Bell in contempt of court for Bell's refusal to turn over FBI records about eighteen "informants" in the Socialist Workers Party. This was the first time that a U.S. Attorney General had been held in contempt for conduct during pretrial proceedings. Although Griesa declined a request to immediately jail Bell for contempt, he did indicate that if Bell failed to comply with the order within a one-week deadline, Griesa would "entertain a motion for more drastic sanctions".[5] Bell indeed refused to comply, and was held in contempt, although this order was stayed pending appellate review.[6] On appeal, the U.S. Court of Appeals for the Second Circuit held that "it was clearly erroneous for the district court to determine that the files are so central to the plaintiffs' case that contempt is the only appropriate sanction for the Government's failure to disclose them", and ordered Griesa to consider alternative sanctions.[7]


2013 Investment in sovereign debt with the intent to recover was also restricted due to the laws of champerty and maintenance and by the fact that most sovereign debt was syndicated. Under the Doctrines of Champerty, it was illegal in England and the United States to purchase a debt with the sole intent of litigating it.[8]

1980s Sovereign debt owed to commercial creditors in the late 1980s was principally held by bank syndicates. This was the result of the petrodollar crisis of the 1970s when oil earnings were recycled into bank loans.

1980s Debt rescheduling efforts in Latin America created many new and easily traded instruments such as Brady bonds that brought new players into the market, including banks and hedge funds.

1992 [9]

1999 critics of vulture funds argue that creditors strategically profit off of debtors that are in financial distress. The term vulture fund is derogatory.[10]

2000 Corporations are legally fictional people invented by the state. In practice, however, it is more complicated.[11][12]

2002 Champerty and maintenance that aim to preclude frivolous litigation. "Maintenance" is the intermeddling of a disinterested party to encourage a lawsuit.[13]

2002 Distressed securities are securities of companies or government entities that are experiencing financial or operational distress, default, or are under bankruptcy.[14]: 270 

2002 In 2002, the British Chancellor (and later Prime Minister) Gordon Brown told the United Nations that when Vulture funds purchase debt at a reduced price, and make a profit from suing the debtor country to recover the full amount owed, the outcome is "morally outrageous".[15]

2002 Should Countries like Argentina be able to Declare Themselves Bankrupt?, by Anne Krueger

2003 August 2003, Manmohan Singh, IMF Working Paper WP/03/161; "Recovery Rates from Distressed Debt - Empirical Evidence from Chapter 11 Filings, International Litigation and Recent Sovereign Debt Restructurings"

2005 In 2011 Elliott's took Peru to National Express.[16][17]

2005 The reliability of the Argentine claim ("We are not in default") can be judged by

1. Definition of default in the original prospectus for Argentina’s 2005 debt exchange:

"Notwithstanding the foregoing, Argentina's obligations to make payments of principal and interest on the New Securities shall not have been satisfied until such payments are received by registered holders of the New Securities."

2005 In 2011 Elliott's took Peru to National Express.[16][18]


2007 Distressed Debt Returns to the Spotlight FTfm, July 30, 2007


2007 The International Monetary Fund and World Bank noted that Vulture funds endanger the gains made by debt relief to poorest countries. "The Bank has already delivered more than $40 billion in debt relief to 30 of these countries...thanks to this, countries like Ghana can provide micro-credit to farmers, build classrooms for their children, and fund water and sanitation projects for the poor," wrote World Bank Vice President Danny Leipziger in 2007. "Yet the activities of vulture funds threaten to undermine such efforts... the strategies adopted by vulture funds divert much needed debt relief away from the poorest countries on earth and into the bank accounts of the wealthy."[19]

2008 Complicating the Morality Play on Vulture Funds (Corrected Story), Christopher Faille, Senior Financial Correspondent, Hedgeworld News, Monday, February 4, 2008

2008 In 2009, bipartisan legislation in the US Congress was introduced aimed to prevent Vulture funds from profiting on defaulted sovereign debt by capping the amount of profit that a secondary creditor can win through litigation based on those debts. The Stop VULTURE Funds Act was introduced, but not passed, in the United States.[20] non-profit financial reform organization, Jubilee USA Network, supported the legislation citing the impact that vulture funds have on poor countries.[21]

2009Elliott Management Corporation By 2009 "more than one-third of Elliott’s portfolio was concentrated in distressed securities, typically in the debt of bankrupt or near-bankrupt companies."[22]

2010 2. Similar in the original prospectus for Argentina’s 2010 debt exchange.

3. all the major rating agencies has declared Argentina to be in default: 3.1. Argentina Put Into Selective Default by Standard & Poor's 3.2. Moody's changes Argentina's outlook to negative as default will hasten economic decline 3.3. Fitch downgrades Argentina to ‘restricted default’ 3.4. China's Dagong Global Credit Rating Co. Cuts Argentina to Default 3.5. The International Swaps and Derivatives Association (ISDA) declares Argentina in default, bonds extend losses.

2010 Investigative Journalist Greg Palast Tracks Vulture Funds Preying on African Debt - video report by Democracy Now!

2010[23]

2010 Legislation passed in 2010 removed the ability of vulture funds to use UK courts to enforce contested debts.[24]

2010 Similar legislation was passed in the United Kingdom,[25] Belgium,[26]

2012 [27] The States of Guernsey debated legislation in 2012.[28]

2012 [29]

2013 Jersey,[30] the Isle of Man,[31] Australia.[failed verification]

2013 As far as debt securities, this is called distressed debt. Purchasing or holding such distressed-debt creates significant risk due to the possibility that bankruptcy may render such securities worthless (zero recovery).[32]

2013 Elliott Management Released its ISS Presentation over Argentina's debt [33][34]

2014 However financiers dealing with vulture funds argue that "their lawsuits force accountability for national borrowing, without which credit markets would shrivel, and that their pursuit of unpaid commercial debt uncovers public corruption."[35] A related term is "vulture investing", where certain stocks in near bankrupt companies are purchased upon anticipation of asset divestiture or successful reorganization.[36]

The term has gained wide acceptance from governments, newspapers, academics and international organizations such as the World Bank, Group of 77, Organisation of American States and Council on Foreign Relations, among others.[25][37][19][38][39]


31 June 2014Through an official press release published on Friday afternoon, June 27, 2014, the Argentine government stated that Griesa attempted to “block the payment for bondholders,” and committed an abuse of authority, after cancelling the deposit made on Thursday into a Bank of New York account. The text specified “the deposited amounts are fiduciary property of the holders” and it is the duty of the fiduciary agent to “hold them on behalf of the holders’ benefit.”[40]

Judge Griesa's ruling was upheld by the full United States Court of Appeals, and the United States Supreme Court found no reason to revise Griesa's ruling.

31 July 2014 According to American economist and recipient of the Nobel Memorial Prize in Economic Sciences, Joseph Stiglitz, with Griesa's decision "America is throwing a bomb into the global economic system".[41]

9 July 2014 The conduct of the vulture funds blocking payments to other creditors to Argentina was denounced by the Organisation of American States, with the exception of the United States and Canada.[38]

15 June 2014 The G77+China also criticised the funds and stated: "Some recent examples of the actions by vulture funds before international courts show their highly speculative nature. These funds pose a danger for all the future process of debt swaps, for developing countries and for developed nations as well".[37]

2014 The US-based Council on Foreign Relations questioned the US Supreme Court for rejecting Argentina’s appeal in its legal dispute with the so-called vulture funds. The organization claimed that such actions make it "more difficult for countries to free themselves from the burden of over-indebtedness" and are " very bad for international capital markets", as well as being a huge blow to national sovereignty. The organization described Thomas Griesa's ruling against Argentina in favour of vulture funds as "punishing the innocent" and "turning the natural order of debt on its head".[39]

On September 9, 2014, the United Nations General Assembly voted to support a new bankruptcy process for sovereign nations, which would promote debt restructuring by excluding so-called "vulture funds" from the process. The vote was 124-11 in favor, with 41 abstentions. The United States voted against the measure.[42][43]

In 2014, Griesa presided over the Argentine debt restructuring, on remand following the U.S. Supreme Court's decision to permit vulture funds, who in the period June 2001 to November 2003 (that is from half a year before the Argentine default) bought bonds, which are negotiable instruments and therefore, like bond owners all over the world, never drew any pay from the issuing country, to access potentially an array of bank records to locate financial assets overseas in seeking compensation.[44] negotiable instruments like bonds are bought and sold like commodities at the price seller and buyer agree upon. Paul Singer's Cayman Islands-based hedge fund NML Capital Limited is the principal litigant in this dispute, having paid considerably more than US$90 million in the secondary market for bonds with a face value of US$832 million by 2014.[45] It should not come as a surprise that during the intervening 13 years, these bonds have drawn interests as bonds do.

2015 Term vulture funds[46]

2015 Paul Singer's net returns.[47][48]

Champerty and maintenance that aim to preclude frivolous litigation. exists in US jurisprudence but disdained by "fans of entrepreneurial lawyering in the academy and elsewhere." There has been recent common usage of the term in the media in Nevada[49] and Ohio.[50]

2016 Griesa sees the elevation of Mauricio Macri to the office of President of Argentina as a key development that, in his words, "changes everything" and may lead to a final resolution of the disputes arising from the default.[51]


? "having paid US$49 million in the secondary market for bonds worth USD832 million by 2014" with the July 6th, 2011 judgment from The Supreme Court of the United Kingdom, which makes it clear that the NML Capital Ltd paid more than US$90 million for 20 percent of their bonds:

"Between 6 June 2001 and 2 September 2003 affiliates of NML bought bonds in the two bond series at prices which were, in aggregate, 55.37% and 62.82% of the face value of the respective series. In November 2003, NML asserted that Argentina was in default under the terms of the FAA because of its failure to pay interest on the bonds. NML refused to take part in the 2005 restructuring offer. Instead it issued proceedings against Argentina in the United States District Court for the Southern District of New York, which handles nearly all of New York City's financial litigation. NML claimed that Argentina had committed an "event of default" under the FAA and that, under the terms of the bonds, NML was entitled to accelerated payment of the principal amount of the bonds and outstanding interest. The principal value of the bonds claimed was US$172,153,000. Unpaid interest on the bonds and interest on the unpaid interest claimed amounted to US$112,031,632.30. The total claimed was therefore US$284,184,632.30."

"Sovereign immunity in NML Capital Ltd v Republic of Argentina" - Supreme Court of the United Kingdom - Judgment http://www.supremecourt.uk/decided-cases/docs/UKSC_2010_0040_Judgment.pdf (page 2 (3 in the .pdf))

"Republic of Argentina v NML Capital Ltd [2010] EWCA Civ 41" (04 February 2010) http://www.bailii.org/ew/cases/EWCA/Civ/2010/41.html Litigation funding

References

[edit]
  1. ^ Blackman, Jonathan I.; Mukhi, Rahul (2010). "The Evolution of Modern Sovereign Debt Litigation: Vultures, Alter Egos, and Other Legal Fauna". Law and Contemporary Problems. 73: 47–61. Retrieved 2014-07-19.
  2. ^ Choi, Stephen; Mitu Gulati; Eric Posner (May 31, 2012). "The Evolution of Contractual Terms in Sovereign Bonds". Journal of Legal Analysis. 4 (1): 131–179. doi:10.1093/jla/las004. Retrieved March 4, 2013.
  3. ^ Szulu, Tad (15 July 1957). "Hard currencies in Brazil: Nation Is Nearly Out of Such Reserves: Coffee Crop May Replenish Funds Debt Payments Due Reserves Were Low". The New York Times. Retrieved 4 March 2013.
  4. ^ http://www.nytimes.com/1982/04/22/nyregion/man-in-the-news-meticulous-judge-in-westway-case.html
  5. ^ "Griffin Bell Held in Contempt of Federal Court" Spartanburg Herald-Journal (July 1, 1978), Vol. 48, No. 53, p. A1.
  6. ^ "Civil Contempt Decree Placed on Griffin Bell" The Bulletin (July 6, 1978), No. 183, p. 1.
  7. ^ In re Attorney General of the United States, 596 F.2d 58, 67 (2nd Cir. 1979).
  8. ^ FEI NG, JERN. "The Role of the Doctrines of" (PDF). Chartered Institute of Arbitors. Retrieved 4 March 2013.
  9. ^ Rosenberg, H. (1992), The Vulture Investor, New York: Wiley and Sons Inc.
  10. ^ Moles, Peter; Terry, Nicholas (June 10, 1999). The Handbook of International Financial Terms. Oxford University Press. ISBN 9780191727245. Retrieved 21 July 2014.
  11. ^ Huang, Peter; Knoll, Michael (2000). "Corporate Finance, Corporate Law and Finance Theory". Retrieved 3 August 2014.
  12. ^ Tirole, Jean (2006). "The Theory of Corporate Finance" (PDF). Retrieved 3 August 2014.
  13. ^ Curzon, L.B. (2002). Dictionary of Law (6th ed.). London: Longman. p. 260. ISBN 0-582-43809-8.
  14. ^ Ineichen, Alexander M. (2002). Absolute Returns: the risks and opportunities of hedge fund investing. John Wiley & Sons. p. 528. ISBN 0-471-25120-8.
  15. ^ "[ARCHIVED CONTENT] Speech by the Chancellor of the Exchequer, Gordon Brown, at the United Nations General Assembly Special Session on children, New York - HM Treasury". Webarchive.nationalarchives.gov.uk. Retrieved 2013-10-15.
  16. ^ a b Ebrahimi, Helia; Blackden, Richard (2011-04-24). "Paul Singer's Elliott Management takes the fight to National Express". The Daily Telegraph. Retrieved 2014-07-21.
  17. ^ "A victory by default?". The Economist. 3 March 2005. Retrieved 4 March 2013.
  18. ^ "A victory by default?". The Economist. 3 March 2005. Retrieved 4 March 2013.
  19. ^ a b "Fonds vautours contre pays pauvres : 26 June 2007" (PDF). Dannyleipziger.com. Retrieved 2013-10-15.
  20. ^ "The Stop VULTURE Funds Act". Govtrack.us. 2008-08-01. Retrieved 2014-07-28.
  21. ^ "Vulture Funds: A Threat to the Poorest Countries and U.S. Foreign Assistance" (PDF). Jubilee USA. June 2009. Retrieved 23 July 2014.
  22. ^ Cite error: The named reference NYT_2009 was invoked but never defined (see the help page).
  23. ^ Cone, Sydney (Fall 2010). "The International Review" (PDF). New York Law School. 13 (1): 17. Retrieved 22 July 2014.
  24. ^ Wray, Richard (2010-04-08). "Bill to stop vulture funds using UK courts gets royal assent". The Guardian. Retrieved 11 September 2014.
  25. ^ a b Wray, Richard (8 April 2010). "Bill to stop vulture funds using UK courts gets royal assent". The Guardian. London.
  26. ^ Wray, Richard (11 April 2010). "Parliament's last virtuous act: to stop vulture funds picking off the poor". The Guardian. London.
  27. ^ "ParlInfo - Federation Chamber : PRIVATE MEMBERS' BUSINESS : Heavily Indebted Poor Countries Initiative". Parlinfo.aph.gov.au. 2012-06-25. Retrieved 2014-07-28.
  28. ^ "Guernsey government targets 'vulture funds'". BBC News. 20 October 2012.
  29. ^ Pesendorfer, Dieter. (2012). "Good-Bye Neoliberalism? Contested Policy Responses to Uncertain Consequences of the 2007-2009 Financial Crisis". In Alexander, Kern; Dhumale, Rahul (eds.). Research Handbook on International Financial Regulation. Cheltenham: Edward Elgar. p. 426. Retrieved 2014-07-19.
  30. ^ "Jersey law to stop 'vulture funds' comes into force". BBC News. 1 March 2013.
  31. ^ Chief Secretary's Office (12 Dec 2012). "Isle of Man introduces legislation to outlaw vulture funds (press release)". Government of the Isle of Man. Archived from the original on 3 Mar 2013. Retrieved 6 Aug 2015. LEGISLATION ... has this week received Royal Assent. The Heavily Indebted Poor Countries (Limitation on Debt Recovery) Act 2012 outlaws a practice that undermines international debt relief efforts. The legislation prevents vulture funds from buying up poor nations' debts for a fraction of their original amount and then using the courts to sue for the full value, plus interest and penalty charges.
  32. ^ "Understanding Distressed Securities". Barclay Hedge. 2013. Retrieved 28 July 2014.
  33. ^ Carreyrou, John (11 February 2013). "Hedge Funds Clash Over Argentina Debt". Wall Street Journal. Retrieved 14 February 2014.
  34. ^ Elliott Management. "Elliott Management Releases ISS Presentation". Yahoo! Finance. Retrieved 12 June 2013.
  35. ^ Moore, Jina (22 March 2014). "The end of vulture funds?". AlJazeera. Retrieved 19 July 2014.
  36. ^ "Vulture Investing: Why a Hedge Fund Chased an Argentine Frigate". The most benign version of vulture investing involves buying liabilities of struggling companies, such as American Airlines or the Motors Liquidation Co. spun off from General Motors, sometimes for a few cents on the dollar, with the hope that the investments will regain some of their lost value as the companies restructure or sell assets to repay creditors.
  37. ^ a b "Unified support of G77+China Summit to Argentina on Malvinas and vulture funds". Telam. 15 June 2014.
  38. ^ a b Alexander Main (9 July 2014). "U.S. on Its Own, Once Again, at OAS Meeting on Argentine Sovereign Debt". CEPR.
  39. ^ a b "US Council of Foreign Affairs supports Argentina, blasts Judge Griesa". MercoPress. 26 June 2014.
  40. ^ Eavis, Peter (28 June 2014). "Argentina claims Judge Griesa "blocked the payment to bondholders"". MercoPress.
  41. ^ "Argentina Finds Relentless Foe in Paul Singer's Hedge Fund". The New York Times. 31 July 2014..
  42. ^ IndyBay International, UN Votes for Process to Enact Bankruptcy Treaty and Stop Vulture Funds, September 9, 2014
  43. ^ IndiaBlooms, UN rights expert welcomes new Assembly resolution on debt structuring, September 11, 2014
  44. ^ Benson, Drew (4 October 2012). "Bond Vigilantes' Ghana Ambush Proves Default Hex Unbroken". Bloomberg Businessweek.
  45. ^ https://news.vice.com/article/talons-out-argentina-desperately-fighting-vulture-funds-over-debt
  46. ^ "Governments Turn to the UN to Avoid Paying Their Debts". Value Walk. 30 September 2015. Retrieved 25 November 2015.
  47. ^ "Hedge Fund - Elliott Management". Insider Monkey. Retrieved 17 June 2015.
  48. ^ "Paul Singer Bio, Returns, Net Worth". Insider Monkey. Retrieved 16 April 2015.
  49. ^ Green, Steve (14 June 2011). "Judge rules Righthaven lacks standing to sue, threatens sanctions over misrepresentations". Vegas Inc.
  50. ^ Rancman v. Interim Settlement Funding Corp., 99 Ohio St.3d 121, 2003-Ohio-2721.
  51. ^ "Argentina Bonds: Judge says he will lift injunctions on debt". Bloomberg. 19 February 2016. Retrieved 1 April 2016.

see also

[edit]

Sovereign default,


ex

[edit]

portal Corporate finance and investment banking portal hedge funds

Category:Fixed income securities Category:Debt Category:Funds Category:Private equity Category:Legal terms Category:Tort law Category:Legal ethics Category:Legal costs Category:Abuse of the legal system

Retrieved from "https://wiki.riteme.site/w/index.php?title=User:Oceanflynn/sandbox/Vulture_funds_in_Argentia&oldid=713035991"