Ex-Treasury Official Backs Elliott In Argentina Debt Battle

May 16 2012 | 12:20pm ET

With President Barack Obama's Justice Dept. opposing his efforts to be paid in full on defaulted Argentine debt, Elliott Management Corp.'s Paul Singer has turned to a former official from a more congenial administration.

Kenneth Dam, a deputy Treasury secretary under President George W. Bush, filed an amicus curiae brief on behalf of Elliott's NML Capital. NML has won five judgments against Argentina, ordering the country to pay the hedge fund in full on debt it defaulted on in 2001—and which it has settled with the overwhelming majority of bondholders.

Singer is a prominent and generous donor to the Republican Party and its candidates.

NML has been awarded $1.6 billion, and has six other lawsuits pending, although it has yet to see a nickel from Argentina. The country is appealing a February ruling in NML's favor—and received the support of the Treasury Dept., which in its own amicus brief warned that the rulings in favor of NML could serve as an impediment to future restructurings.

Not so, Dam wrote. NML's so-called "pari passu" argument, successful in its battles to date with Argentina, won't carry as much water in the future.

"The U.S. expresses concern in its brief that the district court's 'equal treatment' interpretation of the pari passu clause will negatively affect the ability of countries to restructure their debt," he wrote. "Given the widespread prevalence today of collective action clauses—about 83% of the presently outstanding bonds of foreign sovereigns issued under New York law contain them—this concern has no real basis."

Collective action clauses allow a set majority of bondholders to impose restructuring terms on all bondholders.

The U.S. Court of Appeals in Manhattan will hear arguments on Argentina's appeal in the middle of next month.


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