November 5, 2019

Argentina Gets Their Own Man of Steel in Hedge Fund

Man of Steel

"Have no fear! A Hedge Fund is Here!"

The only thing Argentina does better than default on its debt payments is find a representative to save them. Argentina gets their own Man of Steel in hedge fund, reports The New York Times‘s Gretchen Mogenson.

Gramercy Funds Management is not exactly a household name in the investing world. But in recent weeks it has emerged as a major player in Argentina’s long-running battle against creditors.

The fight is over how much Argentina will pay to cover its 2001 default of $82 billion in sovereign debt. Thomas P. Griesa, a federal judge in Manhattan, has ordered Argentina to pay $1.3 billion to investors who hold the defaulted debt and who refused to participate in the country’s subsequent debt restructurings. Argentina has declined to pay.

A group of investment funds that hold Argentine debt created in the restructuring has filed briefs on behalf of the country.

They are led by Gramercy, a $3.4 billion hedge fund that specializes in emerging market investments and that is registered with the Securities and Exchange Commission as an investment adviser.

Gramercy is one of the firms holding debt that was exchanged in the post-default restructuring by Argentina. In 2005, some 91 percent of $82 billion in bonds were exchanged for new debt worth 25 percent to 29 percent of the original value.

But some investors did not agree to the restructuring. Known as the holdouts, they include thousands of Italian pensioners and two large hedge funds, Elliott Management and Aurelius Capital Management. The hedge funds have sued Argentina to try to secure payment of what they are owed.

Judge Griesa in New York federal court sided with the holdouts this year, ruling that the terms of Argentina’s debt require it to pay them when it pays interest on the restructured bonds.

Just when they were up against the wall by mean creditors asking for their money back, Argentina gets their own Man of Steel in hedge fund, Gramercy. Bad guys will think twice before asking to be paid in a timely fashion.

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