It’s amazing the lengths people will go to in order to get their money back. The most egregious version of this involves a US hedge fund, the Ghanian government, and an Argentine naval vessel. How could these three entities across the globe be linked together? Someone wanted to get their money back and it took over 15 years to get it.
Elliott Management is one of the largest activist hedge funds in the world and was founded by one of the most notorious people on Wall Street, Paul Singer, in 1977. One of the most famous investments they were involved with was owning Argentinian debt in 2002 when Argentina defaulted on it. Argentina offered their creditors 30 cents on the dollar as a form of repayment of what they owed, but Elliott wouldn’t accept that deal.
This kicked off a 15 year-long legal battle between Elliott and the Argentinian government. Elliott brought their case to the US and the UK trying to get full payment on the bonds they owned, even though Elliott bought them for a fraction of the cost because no one wanted to hold the bonds with the anticipation of Argentina defaulting. Elliott was able to purchase $617 million worth of bonds for $117 million.
Amidst the court cases in Europe and the US, the most notable part of the story occurs in 2012. Elliott was able to convince a Ghanian court to seize the ARA Libertad as a way to force the Argentinian government to make good on their debt. Elliott was asking for $20M for the release of the vessel. The ship was forced to stay in the port of Tema, Ghana with 43 crewmates for close to 3 months until the International Tribunal for the Law of the Sea ruled that the ship had immunity since it was a military vessel and the Ghanian government should let the vessel free.
In the end, Elliott made out like bandits. Argentina agreed to pay Elliot $2.4 billion for the debt. Keep in mind, Elliott only paid $117 million for this debt, but they were awarded the $2.4 billion due to interest on the debt.
Could you imagine doing this as your job? You purchase over $100 million worth of a country’s debt knowing they will most likely default on it with the plan to take them to court. In the process of taking an UN-recognized country to court, you also seize a military ship to force payment from that government. This battle also lasts over 15 years and in the end, you make 20x your initial investment.
I’m all for people making money, but this is abhorrent behavior. What real value was created from this? Elliott took a country struggling with their finances to court to make them pay more money than was initially owed. Who is really the one paying Elliott? The taxpayers of Argentina.
Investing should be a symbiotic relationship. A company needs to raise additional capital to grow its operations to provide a great range and depth of services. The investors should be able to make a return on their money by taking a risk that the business will pan out and be something the marketplace sees a need for. Making money just for the sake of it isn’t what anyone should be after. I’m very confident in the next generation of investors in being conscious of where they are investing their money and how it’s benefiting the globe, not just their portfolio.
Peace and love.