Phydeaux
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quote:
ORIGINAL: MrRodgers
How to hold a sovereign nation...hostage.
PERHAPS the most complex trial in history between a sovereign nation, Argentina, and its bondholders — including a group of United States-based hedge funds — officially came to an end yesterday when the Argentine Senate ratified a settlement.
Unable to pay its creditors, Argentina restructured its debt in two rounds of negotiations. The package discounted the bonds by two-thirds but provided a mechanism for more payments when the country’s economy recovered, which it did. A vast majority of the bondholders — 93 percent — accepted the deal.
Among the small minority who refused the deal were investors who had bought many of their bonds at a huge discount, well after the country defaulted and even after the first round of restructuring. These kinds of investors have earned the name vulture funds by buying up distressed debt, then, often aided by lawyers and lobbyists, trying to force a settlement.
(gee...'vulture' funds. Where have I heard that term before, maybe vulture capitalists ?)
For a long time, Argentina refused to pay the holdouts. The funds tried all sorts of ways to change the country’s position, including, at one point, having an iconic Argentine ship seized in Ghana.
(I've been trying to tell you kinkroids, you don't ever...fuck with the bankers)
Then a 2012 ruling by Judge Thomas Griesa of the United States District Court for the Southern District of New York threw the game in the vulture funds’ favor, ruling that Argentina had to pay them back at full value, a cost to Argentina of $4.65 billion. NML, for example, would get a total return of 1,500 percent on its initial investment, according to our calculations, because of the cheap prices it paid for the debt and because of a “compensatory” interest rate of 9 percent under New York law.
The ruling, which became effective in 2014, did something else: Judge Griesa issued an injunction blocking Argentina from paying anything to the creditors who had accepted the deal until it had paid the vultures in full. (and they say, you can't corrupt the courts)
The judge gave the vultures the weapon they needed: Argentina had to either pay them off or renege on the default they had negotiated, ruining the country’s credit in the future and threatening its recovery.
On Thursday, Argentina finally settled for something close to the terms that Judge Griesa set. NML Capital will receive about half of the total agreement — $2.28 billion for its investment of about $177 million, a total return of 1,180 percent. (Argentina also paid the legal fees for the vultures.)
Poor babies, imagine only getting $2.28 billion from an original investment of $177 million. How can I face myself in the morning. Well, they did pay my lawyers at least and I guess...that's something.
Britain and Belgium have made particular kinds of vulture suits illegal. Similar legislation, with bipartisan support, stalled in Congress in 2009. (gee, I wonder why) Last September, the United Nations overwhelmingly approved nine principles that should guide sovereign debt restructuring. During the debate, one ambassador apologized to actual vultures — the birds — for using the term.
Oh but they are socialists...can't you tell ? Only 6 countries voted against a similar measure at the UN and of course...the US was 1 of those 6.
HERE
LOL. The amusing thing is you think this is a bad thing.
Argentina borrowed money.
It then went on a socialist binge and destroyed its econoomy like every socialist nation does eventually. It stopped paying on the bonds - and the value of the bonds crashed. No one knew the likelihood of repayment; nor what legal steps would be required. So a secondary market formed. People presumed there would be some kind of haircut - so the bonds were sold for steep discounts.
Again - you act as if this is a bad thing. Investors were holding bonds there was a significant chance argentina would default on. Many of these investors sold out to other investors, taking a steep hair cut, but preferring to get some cash now rather than go for a ride for years, pay attorney fees and risk getting nothing in the end.
Eventually, Argentina entered into negotiations and said - we're going to give you 30 cents - for every dollar we borrowed from you. So we borrowed a 1000 dollars - we're going to give you 300.
Don't like it? We're not going to pay you at all.
Somehow you think its ok for a country to welch on a debt. Not just once - but Argentina has a history of doing this.
So some of secondary markets said - um, no. This is a contract - you're required to honor the terms of the contract. Argentina tried to bully them, tried to stonewall them.
But these investors won. Good for them. You think the investors profits are obscene. Suppose you had 100,000 dollars. You had a 50% chance of losing everything; you had an uncertain time frame on when you might get paid - and you would have to pay out of pocket lawyers fees, at least until you receive a favorable verdict. Do you have the legal tenacity to do it? Do yu have the money to pay the lawyers fees? Do you have good lawyers to argue the case?
No? This is why the debt sold at steep discounts - because no one was willing to take the risk for less. Willing buyer, willing seller.
From this you should take the following lessons.
a. Socialism is fucked. Always was, always will be. It always fails, once they run out of other people's money to spend.
You're presumably too young to remember when liberal meant - being generous with your OWN money. He was a liberal tipper, for example.
These days, it just means someone who wants to spend someone elese's money.
b. Markets forces humble even the biggest countries. EG: Soros breaking the bank of England.
c. Profit - and risk taking are not evil. In this case, it gave people that were risk aversive a way out.
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Insulting the vultures of capitalism...I mean the bird. - 
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