Slugger O'Toole

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Argentinian naval vessel held by Ghanaian court over bond default…

Sun 21 October 2012, 3:00pm

There’s a couple of things worth noting about economics this weekend, but since I’m short of time, I’m starting with the simplest and possibly the least worthy of note:

…the ARA Libertad, a navy training ship seized in Africa nearly three weeks ago as collateral for unpaid bonds dating from the South American nation’s economic crisis a decade ago.

Hmmmm, yep. Ten years ago and Argentina’s default is still haunting even their armed services because the bondholders haven’t gone away you know.

The Ghanaian judge acted on a claim by NML Capital Ltd., which is based in the Cayman Islands. Its owner, billionaire investor Paul Singer, leads a group demanding payment in full, plus interest, for dollar-based Argentine bonds bought at fire sale prices after the country’s economy collapsed a decade ago, forcing a sharp devaluation of its currency.

The vast majority of bondholders accepted about 30 cents on the dollar years ago, which is roughly what the holdouts led by Singer initially paid for the bonds.

NML Capital has said Argentina owes it about $350 million, and offered to let the ship leave if Fernandez’s government put up a $20 million bond to be forfeited.

The real problem with a default is not just it’s own disorderliness, but the fact that it does very little to help the country that got into its mess in the first place to act with any social authority to put it right afterwards.

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Comments (9)

  1. john (profile) says:

    Well done a great way to get money owed back, why should any government feel they themselves are above the law. Would have loved to have been a fly on the wall when Cristina Fernández de Kirchner heard the news. She probably claims the Cayman islands are Argentinian too, there about as close as some of the islands they are supposedly claiming lol.

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  2. terence patrick hewett (profile) says:

    And the moral of the story is: we must not give a financial two finger salute to Frau Merkel. Don’t hold yr breath.

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  3. forthman (profile) says:

    What nonsnse!! Where is the Argentine economy today? A million miles from where it was 10 years ago. Why? Because they had the balls to put their nation first and find an alternative economic model. A virture which is sadly lacking in the southern establishment, imagination lacking, europhile, gravy train career political class. Yet some people direct abuse at the ordinary, highly productive Irish worker!
    Mick, you probably think that it is OK for Irish citizens to BAIL OUT british, german and french banks do you?
    The more discerning on this blog site know exactly who this thread is directed at. Shame on you and get a real job!!!!

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  4. Mick Fealty (profile) says:

    You wanting a place on the blogging team Forth?

    Actually, it is a matter of huge regret to me that Ireland finds itself in hock to such folk as you rather eloquently outline.

    Just pointing out that getting that particular monkey off the country’s back takes more than clicking a pair of ruby slippers together.

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  5. Clanky (profile) says:

    The difference here is surely that this is not a debt between sovereign nations, this is a private equity firm who have taken a nation state to court and had it’s assets seized.

    The repercussions of defaulting on a debt to another country would surely be much worse in that other nations would presumably have much more ability to have much more valuable assets than a sail training ship seized.

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  6. Greenflag (profile) says:

    Fascinating story and one which shows clearly how far financial capitalists like Singer will go to get their pound of flesh .It’s not at all surprising that these latter day Shylocks are working pout of the Cayman Islands -home to 25,000 people but also the tax evasion /avoidance /laundered drug and stolen state assets money capital of the western hemisphere :

    With 457,000 ‘shell companies ‘ I make it 15 shell companies etc per resident . And no doubt amongst them are companies closely linked via ‘paper machinations ‘ to the current GOP Presidential candidate , as well as the usual clientele of Russian and Asian mafiosi .

    In the interests of world financial stability Obama and Cameron and Merkel should launch an ‘invasion ‘ and takeover of the Cayman islands and forget about another Middle Eastern war . Bostered by a ‘win’ over the Cayman Islands they could then attack Switzerland and then the Channel Islands .

    Oh but hang on a minute the UK could’nt participate as most of these tax evasion islands are Crown Colonies and you can’t invade yourself or can you ?

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  7. Reader (profile) says:

    Greenflag: Bostered by a ‘win’ over the Cayman Islands they could then attack Switzerland and then the Channel Islands .
    Then work their way up the Corporate tax rate ladder until they reach Ireland.

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  8. Greenflag (profile) says:

    Reader,

    Apologies should have read bolstered .I think you meant work their way ‘down ‘ the Corporate tax rate ladder until they reach Ireland but of course they can also work their way down the labour cost ladder and outsource to China , Poland ,Vietnam etc etc .

    On the other hand even in the non financial capital sector there are ‘legitimate ‘ways to avoid taxes on profits even when those profits are gouged out of the local economy

    Here’s an example

    ‘Facebook UK paid £238,000 in tax last year, according to its accounts. Its sales were £20.4m. Most of the company’s income is believed to be legally going through its European base in Dublin, where corporation tax is lower than in the UK.

    And a report in the Guardian in April said that online retailer Amazon had generated sales of more than £7.6bn in the UK over the past three years but had not paid any corporation tax on the profits from those sales.

    Note the ANY in the last paragraph :(

    Meanwhile small businesses with a tiny fraction of the sales of an Amazon get to pay tax or face a prison sentence /fine .

    Full story from the beeb

    http://www.bbc.co.uk/news/business-20022365

    When it comes to the type of actions which Singer above exemplifies you will note it’s always the smaller , powerless , economies which get it in the neck . The USA benefits immensely from the dollars role as world currency of last resort . The British Empire benefited from the world supremacy of sterling and it’s low interest rates which could entice ‘imperial customers ‘from India to Malaysia to South Africa to buy British manufactured goods on easy financial terms at the cost of developing their own local manufacturers.

    I can’t imagine Singer pulling a stunt like that on a much larger economy and or country . Historically the failure of debt payers to cough up resulted in war and efforts to recupe debts . The French in the aftermath of WW1 attempted to impose harsh payback terms on the defeated Germans .And we know how that worked out after another world war .

    Greece will probably never be able to repay it’s debt . Everybody knows this and yet the ‘pretence ‘ continues ?
    Why ?

    Perhaps the Germans will settle for the return of all those submarines they sold to the Greeks on very good terms just a few years back ?

    Or will the Germans see that Greek submarines are impounded next time any dock in a non Greek port ?.

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  9. HeinzGuderian (profile) says:

    ‘Greece will probably never be able to repay it’s debt . Everybody knows this and yet the ‘pretence ‘ continues ?
    Why ?’

    Because the dear aul irish would be out next with the begging bowl,closely followed by Spain,Italy and Portugal

    ‘Begorra,it wasn’t our fault. It was the crooked politicians,the famine,the proddy bastards,but most of all those Brits.’

    Ermmm,sorry Paddy,you vote for your crooked politician gombeens,so cough up or sink !! ;-)

    Ya vol…..

    .

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