Hedge Funds Moot Argentine Debt Deal

Oct 24 2013 | 1:06pm ET

Hedge funds hoping to head off another Argentine debt default have proposed to pay their peers holding out from the last default.

The hedge funds in question, including Brevan Howard Asset Management and Gramercy Funds Management, hold restructured Argentine debt. In debt exchanges in 2005 and 2010, the overwhelming majority of Argentine bondholders accepted huge losses in exchange for new bonds—but U.S. court rulings have thrown into question whether Argentina can continue to pay its obligations on those bonds while refusing to pay the holdouts, led by Aurelius Capital Management and Elliott Management.

The deal under consideration would see exchange bondholders give up 20% of their bond coupon payments for the next five years to Elliott, in exchange for Elliott ending its legal fight against Argentina—one that has, to date, been conspicuously successful. The deal does not require Argentina's approval. It has not been formally presented to the holdouts, and may face a cool reception.

"It is absurd to think that Argentina's debt problems can be resolved without Argentina's participation," a spokesman for Elliott's NML Capital unit told the Financial Times, noting that "Argentina appears to remain unwilling to come to the table."

Others questioned whether the agreement, which amounts to a further haircut for exchange bondholders, could win the 75% support it needs among them.

The U.S. Second Circuit Court of Appeals, which has already upheld a lower-court decision ordering Argentina to pay the holdouts, is currently considering whether the re-hear the case. If Argentina should lose before the court again, its only recourse would be to the U.S. Supreme Court, which earlier this month declined to hear the case.


In Depth

GSAM’s Papagiannis on Liquid Alternatives

May 25 2016 | 5:07pm ET

The popularity of liquid alternatives strategies has blossomed in recent years,...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...