This morning the U.S. Supreme Court “handed Argentina two major defeats,” in the words of the New York Times, in cases related to the country’s repayment of debt to creditors based in the United States. The details:
In a one-line order issued at 9:30 a.m., the court refused to hear Argentina’s appeal of a lower court’s decision requiring it to pay holdouts who did not participate in debt restructurings in 2005 and 2010. About 45 minutes later, the court issued a 7-to-1 decision allowing the bondholders to issue subpoenas to banks in an effort to trace Argentina’s assets abroad.
The Court’s actions will no doubt have real-world repercussions in Argentina and in the world of international finance, and I do not mean to minimize these consequences when I say my main response any time I hear about this story is to remember the time a Wall Street firm with a few hundred employees petulantly took indirect control of a naval vessel which belonged to a country of 43 million people. This 2012 AP article about the incident, in which Argentina’s naval flagship (called the Libertad) was temporarily detained at a port in Ghana on behalf of Elliott Capital Management, explains:
The seizure of the flagship of Argentina’s navy stems from a complaint from a U.S. hedge fund. Elliott Capital Management’s lawyers have searched worldwide for ways of collecting on Argentine bonds bought at fire-sale prices after the South American country’s record debt default a decade ago. The $15 billion hedge fund is run by billionaire Paul Singer.
Most bondholders eventually agreed to cancel Argentina’s bad debts for about 30 cents on the dollar, but Singer is among those holding out for the full promised value of those notes, plus interest. Courts in the United States and Britain have granted judgments worth $1.6 billion to the hedge fund, but it and other bondholders are still suing for billions more. Argentina has refused to pay…
A court in Ghana on Tuesday ordered the ship to be held in port until Argentina posts a court bond equal to its value, which could be $10 million or more. Singer would then try to collect that money.
The case did not involve any use of physical force; an Argentine crew stayed aboard the ship to take care of it. The Libertad was then released after a few months after a United Nations tribunal told Elliott Capital, more or less, to knock it off with all the shenanigans.