Outlook Like some giant tick on the backside of an Argentinian bull, the vulture fund Elliott Capital Management is proving impossible to remove from the country’s stricken economy.
Elliott - one of the two main funds refusing to accept the haircut longer term lenders to Argentina have agreed to - is on a global hunt for Argentinian assets it can seize, having won its case to be paid in full in the US courts.
It has just issued subpoenas on 18 banks claiming they are hiding embezzled Argentine assets it says are being hidden in shell companies in Nevada.
Given its record in the courts so far, and Nevada’s reputation as a tax avoidance hub, Elliott could well be right.
As I wrote here last week, you wouldn’t bet against it winning every nickel it says it’s owed from Buenos Aires before this saga ends, despite Argentina’s twisting and turning to circumvent the US court defeats.
Little wonder that other developing countries have been looking on in horror. Now, more than 130 of them, known as the G77 plus China, have proposed to the United Nations new rules to propose new standards for debt restructurings to prevent vultures with a fraction of the debt from derailing agreements. It’s similar to the one proposed last week by the banks themselves under the International Capital Markets Association grouping that would force all lenders to accept the terms. But there’s a crucial difference: the ICMA plan only applies to new bond issues which may not default for decades. This new scheme would apply instantly to wherever the next crisis comes from.
But there is a problem. Firstly, sure as beef is beef, the vulture funds will find ways to overturn them in the civil courts. The vulture funds have won their case because the original loan contracts said they should. It would be unusual for a UN decree to be able to rewrite previously agreed contracts. Furthermore, previous similar efforts have been voted against by wealthy Western nations such as the US and the UK, who argue countries, and their occasionally tinpot dictators, should be held to account for their reckless borrowing.
The UN vote is likely in the General Assembly this week. Will it be the lighted cigarette to remove the likes of Elliott from the Argentine rump?Reuse content