Caught in the battle between hedge fund billionaire Paul Singer and Argentina, some hedge funds complain that they are being held hostage.
Bondholders who agreed to a 70 percent hit as part of Argentina’s debt restructuring are concerned they might not get paid all they are owed if Singer’s Elliott Management gets its way.
Gramercy Funds Management, one of the bondholders that agreed to accept 30 cents on the dollar when Argentina defaulted in 2001, said as much to Manhattan federal court Judge Thomas Griesa yesterday.
“We’re the ones being held hostage,” Sean O’Shea, Gramercy’s attorney, told Griesa at a hearing.
Elliott had asked the judge to lift a stay that would require Argentina to pay up to $1.3 billion to Elliott in December, when Argentina makes payments to other bondholders.
At yesterday’s hearing, Griesa indicated the stay would remain in effect as long as the appeals process is under way.
Griesa poo-poohed Gramercy’s concerns, saying “Talk to the Republic. They can pay you.”
The South American country’s bonds have tanked since an appeals court upheld Griesa’s ruling that Argentina would have to pay Elliott and other holdouts who didn’t agree to the debt restructuring each time it makes a payment to the bondholders who accepted the debt swap.
The exchange bondholders like Gramercy fear that if Argentina doesn’t pay Elliott — which President Cristina Kirchner has vowed never to do — they either won’t get paid or will get only a partial amount. That could lead to further litigation and a possible default by Argentina.
“All we want to do is get paid. We’ve already taken a severe haircut. How does it solve the problem by giving them 100 percent out of our hide?” said O’Shea, who is talking to 20 other institutional investors about intervening in the case.
Bank of New York Mellon, the trustee for the bondholders, which makes the payments, is also expected to intervene. If it doesn’t make the bond payments to investors like Gramercy, it could be sued.