El Cronista The philosophy of a vulture: Paul Singer says that humbleness is the secret to his success

Debt Coverage:

 

Ambito Financiero: “Argentina decides key presentation before Griesa”

 

Chaco Dia Por Dia: “‘We are paying all the debt payments religiously, not the vulture funds’”

 

La Nacion: “A star attorney against the holdouts”

 

El Cronista: “The philosophy of a vulture: Paul Singer says that humbleness is the secret to his success”

 

Telam: “Singer, the logic of a vulture from the financial architecture”

Ambito Financiero

Argentina decides key presentation before Griesa

 

Thursday, November 15, 2012

 

After the presentation of the Argentine government on Tuesday before the Court of Appeals of the Second Circuit of New York, tomorrow another will be made, which will count on the so-called G-93 (the 93% of the investors that entered the debt swap) and against the ruling that favors the vulture funds.

 

In the counterpoint generated from the ruling which obliges Argentina to pay the bondholders that didn’t enter into the debt swap, the attorneys that represent the Argentine state alleged before the Court of Appeals that, citing expert sources in the financial press, if the ruling holds against the country it could affect future processes of sovereign debt renegotiations.  Also, they said that it would also impact agreements that are in effect on billions of dollars in debt in New York and will exacerbate the future crises of sovereign debt to make voluntary restructurings essentially impossible.  “For these reasons, generalized consternation has been generated in the market, which acknowledges that, without a solution, the decision will provoke a radical change in the panorama of the restructuring of sovereign debt,” warns the Argentine government presentation.  “There is no manner in which a government could restructure its debt and be safe from litigation, in addition to exercising sovereign immunity (Argentina now seems to have a hole in its armor), and this decision sends signals that every sovereign could have a hole in its armor.”

 

On the other side, the vulture funds NML Capital of Elliott Management and Aurelius Capital Management made a presentation to Judge Griesa also on Tuesday demanding that they be paid what is owed to them.  In that presentation they asked the judge to reinstate his original ruling, which demands that the country pay the holdings on bonds in default.

 

They warned that Argentine officials, including President Cristina de Kirchner, have said that they will not pay the creditors that didn’t join the swap offers that the country launched in 2005 and 2010.

 

 

Chaco Dia Por Dia

“We are paying all the debt payments religiously, not the vulture funds”

 

Thursday, November 15, 2012

 

Governor Jorge Capitanich was the host and presenter of the speech on the “X-Ray of the vulture funds” given by the Argentine ambassador in the United States, Jorge Argüello, on Tuesday night in the Auditorium of Casa de las Culturas.  For his part, the speaker railed against the group of people who are “speculators with countries in crisis” while predicting that “in little time the Frigate Libertad, attached in a port in Ghana by a judge of that country at the urging of the vulture funds, will return to the country.”

 

In the first round, the provinical leader was the presenter of the speaker.  “It’s an honor to be able to receive a person of enormous background as Jorge (Arguello) in an issue that concerns all Argentines,” he said.  Thus, he recalled that “the Argentine ambassador in the United States, counts on an extensive background because he was also the permanent representative before the United Nations (UN); national deputy and chairman of the Committee on Foreign Relations, among other different posts.”

 

Under the title, “X-Ray of the Vulture Funds.  Implications in the Bilateral Relationship”, Arguello made a review and analysis of relations between Argentina and the United States that contributed to comprehending a complex reality, contributing to the construction of a fuller citizenship.

 

Argüello: “They are very rich gentlemen and speculators… vultures”

 

Before his elocution, the Argentine ambassador in the United States defined the vulture funds as “very rich gentlemen and speculators that dedicate themselves to buying debt bonds from countries that have deeply troubled economies … vultures.”

 

At the time of drawing out the methodology of the vulture funds that “bought paper or a bond that has a nominal value of 100 but they bought them for 12.  Immediately after that, they seek in any place in the world, a court that is favorable to them and initiate a lawsuit to collect those 100 plus interest over the default.”

 

Argüello recalled that the methodology already used in the Congo, in Peru, that they have tried to do in Brazil, in Argentina, that they are doing currently in Greece, in Spain and various other countries.  “It’s a phenomenon that we all have to take care about in the world, and Argentina is warning about this maneuver in the same headquarters of the G-20 and promoting a discussion in relation to these funds,” he said.

 

“We religiously pay all the debt payments” 

 

Regarding the national situation, Arguello recalled that Argentina, starting with the economic recovery initiated under the Presidency of Nestor Kirchner, in 2005 started a debt swap, produced by the default – impossibility of paying its debt – from 2001.  Then, already under the leadership of President Cristina Fernández de Kirchner completed the swap in 2010.

 

By then, the swap came together for 93% of that debt that entered into default in 2001, “but there is a 7% that didn’t enter it and simply because they didn’t want to,” Arguello recalled.

 

That percentage of creditors, the 7 percent, is the one that is made up of the so-called vulture funds.  “Those that didn’t want to enter, clearly because it’s not the nature of their business because they didn’t buy at 12 to settle for 30, but the they acquired them at 12 to collect 100 and to add to that amount interest from the default, clearly a vulture interest,” the ambassador said.

 

The most important thing that is happening on the world stage is “to pay every debt payment religiously on every bond that came out of the swaps of 2005 and 2010.  That gives Argentina prestige and gives the necessary predictability to achieve the strength to resist this usurious extortion from the speculators of the vulture funds,” he said.

 

“We are not going to pay the vulture funds and the frigate will return”

 

Regarding the status of the Frigate Libertad, attached in a port in Ghana by a judge from that country, at the insistence of a creditor, Argentina was blunt: “we will not pay one peso to the vulture funds, simply because they have no right and are trying to extort with maneuvers and actions like the attempt to attach a war ship,” he said.

 

About the panorama at the world level he highlighted that Argentina counts on the support of a majority countries in the world.  “All of them are taking a reading against the interests of the vulture funds, where it is all the more clear that they are very powerful people who have a lot of money and capacity to act.  To the point of not being able to achieve in Argentina with a judge, they were able to do so, for example, with a judge in Ghana.”

 

"We’re bringing forward a campaign on awareness in the whole world, and in that framework we are here in Resistencia,” he explained. 

 

Lastly, he put forward that the return of the Argentine ship is only a question of time.  “We are working in all the necessary forums and in the world, not only to release the Frigate but also to fully attack those vulture funds and their methodologies.  These same vulture funds that yesterday were flying over Argentina and Africa, today they are doing it in Greece and in Spain.  For that it is that the precedent that is left from how Argentina resolved the renegotiation of its debt will be fundamental for the future debt negotiations in the world,” he concluded.

 

 

La Nacion

A star attorney against the holdouts

 

Tuesday, November 13, 2012

 

By Martín Kanenguiser

 

The bondholders that entered the swaps in 2005 and 2010 are playing a strong card to try to head off the tragedy of an Argentine default: they hired the famous American attorney David Boies.

 

Boies will have a tough task to, at least, delay the execution of the sentence of the Court of Appeals of New York, which ordered the government to pay a group of holdouts in the short term.

 

A lover of the low profile, this attorney born in Illinois is an expert on difficult cases: he defended Michael Moore against the government of George W. Bush over the film, “Sicko” and the big tobacco companies against the family of a smoker who died of cancer in Florida.

 

He also defended the investment funds over the Argentine default of 2001, the Democratic candidate Al Gore when he faced off against Bush in 2000, and the company Napster, one of the main musical archives of the internet, in its fight against piracy.  In all those cases, he lost.

 

Today, in this case, it will be the turn of the vulture fund litigants to file their argument by brief before Judge Thomas Griesa –charged with executing the sentence – on the form that Argentina must pay them and the responsibility of the banks that distribute the government’s bonds.

 

Next Friday, the government should respond to them and also present a sworn statement committing to obey the American judge, according to what was established in last Friday’s hearing.

 

Two sources connected to the funds that entered Argentina’s restructuring confirmed to LA NACION that Boies “is advising” the dozen funds that could have a key role, together with the American government, in the possibility that this ruling is partially diluted.  “Something being worked on, while there still aren’t high expectations,” an official source also acknowledged.

 

The better scenario for these funds, who are furious with the way that Judge Thomas Griesa is handling the case, is that the judge oblige Argentina to pay, but without affecting the unattachable nature of the resources that are channeled through Bank of New York (the country’s pay agent).

 

Until now, the American courts have given indications that this entity could be considered an “accomplice” of the government if it eludes paying the bondholders that won the case..  But the investment funds that did accept the swaps believe that the health of the American financial system will suffer if Bank of New York is made responsible for transporting money from Argentina, because it would only be complying with a legal contract.

 

In turn, the vulture funds are pressuring the courts so that any bank that tries to pay the rest of the bondholders without honoring them be prosecuted by the court as well as the government.  “That is crazy, they can’t oblige people that accepted the swaps to lose more money, because that would require us to also file lawsuits against Argentina and demand that the judges provoke a default,” said a qualified source that, these days, is trying to determine in the country the scenario of the coming weeks.

 

Regarding that, they believe that the alternative could mature on collecting restructured Argentine bonds through France or Switzerland, far from Griesa’s reach.

 

On the other hand, the bondholders also believe that the Obama administration, as LA NACION reported two days ago, could file a brief to limit the damage generated by the ruling of the Court of Appeals, while they affirmed that it must be more emphatic that in its previous support.  “The brief filed by the Treasury Department in the first case was very weak and ambiguous, reflecting the cold relationship between Washington and Buenos Aires; now stronger support is needed, which is difficult to imagine given the lack of progress on bilateral issues,” said an attorney close to the process to LA NACION.

 

The hope, the source noted, is that Europe and the US believe that allowing the complaint of the holdouts in the Argentine case would generate the worst precedents for future sovereign restructurings.

 

But the US is also playing hard to get Argentina to commit itself to normalizing its statistics, before the IMF debates one month from now if it will sanction the government after six years of manipulation.

 

 

El Cronista

The philosophy of a vulture: Paul Singer says that humbleness is the secret to his success

 

Monday, November 12, 2012

 

Exisential humbleness. Paul Singer says that this is the secret of his success.   And so he said only a few months after a mega-events of the industry of funds in the ostentatious Hotel Bellagio in Las Vegas.  It was one of those rare public appearances, that the owner of Elliott Management hinted at a philosophy that he makes an effort to compare finances with zen.  “The main enemy of profitability in the long term is ourselves,” he said, unfathomable, the magnate who for more than a decade has accosted Argentina over the debt in default.

 

“’What am I not understanding?’is a much more important question than ‘how cool am I?’”, he reflected before an audience of managers that venerate him as a rock star.  “The worst is complacency and believing oneself is the best.  That is absolute death,” he sentenced, “and in that it’s difficult to contradict it,” said the man that for many others represents the most deplorable part of the market that makes a profitable niche among the weakest.

 

But the New York Times itself described him as “one of the most audacious hedge fund administrators,” admired for a history of returns of 14% per year over the 35 years of Elliott’s existence, that started with US$1 million and today has more than US$20 billion.  There were only two years when Singer lost money for his investors: in 1998 and 2008, while the red in full crisis was only 3%.  Even in 2001, a bad year for the industry, won 4%.  There was no year, in fact, in which it didn’t beat out the S&P 500.

 

Vulture tactic

 

A conservative estimation indicates that the vultures are litigating an average of six years to obtain results and the yield is in general 3 to 20 times the investment.  But they don’t always win.

 

In fact, the favorable sentences are rather rare and it’s unusual that they manage to attach assets from countries that they are suing.  At least so say Federico Sturzenegger and Jeromin Zettelmeyer in the book “Default and lessons of a decade of crisis”: on the 35 cases considered in the last 20 years, only in six occasions did they recover the totality of the value of the bonds, in 15 opportunities they lost and in another six recovered less than a third of what they sued (there is no information on the rest of the cases).

 

Overall, the stalking of the most vulnerable countries has become their most especially questionable modus operandi.  In old Zaire, today the Democratic Republic of Congo, 30 years ago, the dictator Mobuto took a loan for US$30 million for a project that never came together.  In 2010, a vulture funds called FG Hemisphere saw an opportunity with that unpaid debt.  It bought it for some US$3 million and sued the country – last in the ranking of UN human development in 2011 – for US$100 million, which were then upheld by a court in the Jersey Islands last year.  The payment recently was blocked when it was discovered that FG Hemisphere had acquired the loan in an illegal manner. 

 

FG Hemisphere turned to the British territory Jersey to take advantage of a legal hole in the Debt Relief Act that the United Kingdom approved in 2010, the only country that until now has done something to halt the vulture offensive.  IN 2009 a British court rules in favor of a fund that demanded US$20 million from Liberia.  But a desperate request from the president of that country, the Nobel Peace Prize winner in 2011, on a TV program, managed to change history.  The new law, which prevents lawsuits for exorbitant sums in the United Kingdom, obliged the fund to agree to US$1 million.  But the vultures continue to find support in havens like the Channel Islands or the British Virgin Islands. 

 

Harvard lawyer

 

Singer is this opportunistic philosophy incarnate.  Born into a Jewish family in the center of New York City (his father had a pharmacy), a Harvard lawyer and once labeled the “Republican George Soros”, he gained notoriety in the media when he financed the presidential aspirations of New York Mayor Rudy Giuliani.

 

In 2007, a year before the great Wall Street collapse, Singer gave a conference in which he warned that investing in CDOs (instruments that represent packages of debt of different kinds) was a big mistake.  He applied his own recipe and gained 30% that year, his best results in history, betting on the collapse of the real estate market.

 

In the Bellagio conference in May, when they asked him for a new investment idea, he recommended – always furious with Obama and Bernanke – to go against US debt or any countries that were printing money to stimulate the economy.

 

Unscrupulous for some, visionary for others.  Singer’s logic, today litigating with countries like Ivory Coast, Nicaragua and Turkmenistan, might be scandalous.  But he entrenches himself in the legitimacy of demanding that a debt be honored.  “We never have had a dispute with a country that couldn’t pay its debts.  We always litigate with countries that can pay but refuse to do so,” he always insists.  An uncomfortable  assertion for Argentina, for which boasting about its reserves is commonplace in the K-discourse.

 

 

Telam

Singer, the logic of a vulture from the financial architecture

 

Saturday, November 10, 2012

 

By Mara Laudonia

 

Paul Singer, owner of the vulture funds that became one of the biggest litigants against Argentina over the default and among the top 10 most important contributors to teh defeated Republican presidential candidate Mitt Romney in the US, jumped onto the front pages of the newspapers with the attachment of the frigate Libertad.

 

Coming off a recent ruling from the Court of Appeals of New York and at the center of getting an attachment on the Frigate Libertad in Ghana, it allowed him to talk about Argentina without emissaries and with an ironic tone before his investors.

 

"We didn’t buy Argentine debt to end up with a boat too large to sail on Long Island,” he said, among other phrases.

 

The investors that deposit their trust in Singer – the head of a fund that administers US$20 billion – only measure profitability and ask little about whether the strategy in Ghana is legitimate.

 

When the attachment happened, there surfaced in the specialty media the existence of presumed suspicious movements and previous meetings with Singer and the African judge that granted the attachment on the Argentine asset, which could lead the government of that country to move ahead in an investigation over the international problem that the African country could face by risking accusations of taking actions that violate the laws of the Sea before the United Nations.

 

If the government or the courts of Ghana remain unmovable, one has to ask why.

 

Judging by Singer’s history, it’s known that he well knows pressure on officials and extortion to get collection on bonds from poor countries, one of the most emblematic cases being Congo. 

 

As a novelty, this time he used Ghana as a pivot to get Argentine to be obliged to pay what he asks.

 

The vultures live on carrion, but they need a propitious climate to find it.  Singer is the owner of the premier vulture fund that is known since the era of the invention of sovereign bonds (Elliott Associates) at the end of the 1970s, and with greater furor in the 80s, when at the hand of the IMF bank syndicate loans were restructured and turned into bonds for unknown holders, giving birth to the Brady bonds.

 

The list of countries that Singer caught in a checkmate is long.  They go from Peru, Albania and Argentina to Congo, with maneuvers that exceed legal processes, seeking precedents with officials and judges to pressure and to achieve favorable sentences.

 

In December 2010, Playboy Magazine unveiled before what we Argentines have known for 10 years: the history of Elliott and Paul Singer and his partner Jay Newman, the true strategist of the fund and its legal actions.

 

According to what Pulitzer Prize winning author Aran Roston wrote in Playboy, the vulture funds don’t have any qualms about cornering poor or troubled countries, and they seek all the means to pressure government and officials.

 

They do it with their own investigations to take advantage before world courts, building accusations in focus of corruption, that seeks to show their own use of funds instead of using it to pay debts contracted with creditors.

 

In the case of Congo, Roston compared Singer and Newman with spies from the movie, Casablanca, winner of the 1943 Oscar, where the rich exiles from Nazism arrived in the African country, and then were trapped by an intelligence network from the Gestapo.  Roston consulted with sources that said that Singer has ties with former CIA agents, that – via London – he got information about corruption to corner the rulers of Congo.

 

It’s calculated that a subsidiary of Elliott, Kensington International, bought US$30 million in debt at the price of no more than US$20 million (a discount price) and was compensate with US$100 million between 2002 and 2003.

 

On the other side, in a recent investigation, the World Bank argued that more than a third of the countries that qualify for a world program of debt forgiveness, due to famine and poverty they are suffering, they were cornered by lawsuits from at least 26 vulture funds, which received a total of US$1 billion.

 

Here Singer, through Newman, is among the top ones.

 

Argentina, which still hasn’t paid them one cent and assures it will not do so, continues to suffer the vultures despite having restructuring 93% of its debt in default.

 

The Argentine government complains of a void, a legal hole, in the international financial architecture, that allows investors like Singer and Newman to go against troubled countries with these methods.

 

In the world, above all after the Argentine crisis, began to emit bonds with collective action clauses that in theory resolve this problem with majorities.

 

That mechanism was used, recently, during the Greek restructuring, in a country that still couldn’t avoid paying 100% of the debt demanded by the vulture funds before the first maturity, which gave these funds the character of privilege over the investors that entered the offer, who had a massive acceptan