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...and returned shortly thereafter.
by crdoconnor 9y ago
...and returned shortly thereafter.
- lettergram 9y agoIt appears they did pay $20 million though, which is pennies on the dollar, but still (probably) worth it.
- sseveran 9y agoThe funds involved made far more than $20M. https://www.nytimes.com/2016/04/25/business/dealbook/how-argentina-settled-a-billion-dollar-debt-dispute-with-hedge-funds.html https://www.nytimes.com/2016/04/25/business/dealbook/how-arg...
- smcl 9y agoYeh the hedge funds buying old Argentine debt second-hand for pennies on the dollar and then holding out for 100% was pretty ... yuck.
- seanmcdirmid 9y agoThat’s typically what bad debt buyers do. The discount is on the chance of the debtor paying, not a new amount they are supposed to pay.
- smcl 9y agoI should've been clearer, I'm all over the place today and didn't finish my thought. I was referring to the "vulture funds", https://en.wikipedia.org/wiki/Argentine_debt_restructuring#Background_and_holdout_problem https://en.wikipedia.org/wiki/Argentine_debt_restructuring#B... who went a little further than that. Here's something from the linked article: " Upon default, Argentina's bondholders sued to be repaid 100% of their bonds' face value.[6][20][21] Among the bondholders were vulture funds, who had speculatively acquired US$1.3 billion of the bonds' total value on the secondary market for cents on the dollar after the 2001 default.[5][22] Vulture funds also owned a large quantity of credit default swaps (CDS) against Argentine bonds. This created a further incentive to not only trigger a default against Argentina; but also to undermine the value of the bonds themselves, as the CDS would pay out at a higher rate if the defaulted bonds decline to extremely low values.[22] "
- whatok 9y agoThat entry is extremely opinionated and does not necessarily reflect reality in all cases. The part on CDS "incentives" highly depends on what CDS and bonds owned (a lot of CDS in this case used as a hedge) and a lot of people lost a lot of money on bad trades involving both.
- nradov 9y agoCould you edit the entry to be less opinionated?
- tomjen3 9y agoYou can call the vulture founds, but the facts of the matter is that the original owners would rather recover some of their money, for sure, than lose all of them, and that they have somebody to sell to means ultimately lower borrowing prices for everybody.
- sseveran 9y agoActually the whole Argentina situation has helped evolve how sovereign debt is issued. Argentina's bonds lacked what is called a collective action clause which allows the bonds of all bond holders to be restructured if a predetermined percentage of the bondholders vote for a voluntary restructuring. It was further complicated by the fact that the swapped bonds had a clause that said that granted them most favored nation status if there was any further restructuring.
- nradov 9y agoHow much should Argentina be able to cheat their lenders out of before it stops being yucky? Or would it be better to prohibit trading bonds on the secondary market, driving up borrowing costs for everyone?
- smcl 9y agoFraming Argentina as some scheming, cheating bad guy and the bond-holders as some courageous crusaders trying to make the world a better place somehow by driving down borrowing costs is a real stretch.
- crdoconnor 9y agoThe ship was released after an ICJ ruling: https://www.theguardian.com/world/2012/dec/20/argentina-sailing-ship-ghana-release https://www.theguardian.com/world/2012/dec/20/argentina-sail... There was a change in policy after Macri was elected, and the bondholders ended up getting paid $6.5 billion, but that was just a change in policy, not a response to any kind of threat.