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Shiver me timbers!

Hedge fund keeps Argentine navy ship in dock

Paul Singer
Paul Singer

A Ghanaian court has blocked an Argentine navy training vessel from leaving one of its ports after granting a request from billionaire hedge fund manager Paul Singer, who wants the South American country to repay $1.6 billion to his Elliott Management Corp.

Argentina's Foreign Ministry protested the Ghanaian court decision Wednesday, saying in a statement it won't give in to “attempts at international and local extortion by vulture funds.”

Peter Truell, a spokesman for Elliot Management, declined to comment on the decision or the fund's Argentina strategy.

Elliott Management's NML Capital Ltd. and EM Ltd., a fund owned by billionaire Kenneth Dart, are among the investors who want to force Argentina to pay the full value of defaulted bonds that weren't swapped in two restructurings. About 94% of the securities were exchanged in 2005 and 2010 through offers that gave creditors about 30 cents on the dollar.

The action against the ARA Libertad, the Argentine tall ship stuck in Ghana, follows attempts by owners of the defaulted bonds to seize Argentine government assets from aircraft owned by flagship airline Aerolineas Argentinas to central bank funds deposited in banks in New York.

President Cristina Fernandez de Kirchner has also failed to reach an accord on $8.9 billion of defaulted Paris Club debt and is engaged in a public dispute with the International Monetary Fund, which threatened to censure Argentina if it doesn't improve its inflation reporting. Private economists have questioned the government's data since 2007, saying that prices are rising about 24% a year, vs. the official rate of about 10%.

Since her re-election in October, Ms. Kirchner has tried to stop money from leaving the country and shore up international reserves by banning most purchases of dollars, limiting imports and ordering companies to repatriate money held abroad.

While the value of the triple-mast frigate represents a fraction of the money the Argentine government owes Elliot Management, unresolved claims have prevented the nation from tapping international debt markets for more than a decade, according to Arturo Porzecanski, director of American University's international economic relations program. That has compelled Ms. Kirchner to use central bank reserves to pay its obligations and increased Argentina's borrowing costs, now 10.7%, to more than double the average for developing nations.

“It's a reminder to the Argentina government that it cannot ply the financial waters of the world without fear of attachment,” Mr. Porzecanski said in a telephone interview from Washington. “The Argentines are definitely afraid that any money they could raise abroad could be impounded.”