The Power Of Reputation
Don't ever annoy Hedge Fund Manager Paul Singer...
Good morning, everyone.
This week’s newsletter includes: a movie-like scenario that actually happened in the crazy world of hedge funds…
The Hedge Fund Manager Who Took On Argentina...And Won
Paul Singer was owed money by Argentina, so he captured one of their warships.
Here’s the unbelievable true story of money, power & reputation…
In 2000, Paul Singer’s hedge fund Elliott Management bought $600 million worth of Argentine bonds for just $100 million.
Soon after, Argentina plunged into an economic depression.
A few years later, the Argentinian President urged bondholders to accept deeply discounted repayment terms, as little as 25-cents on the dollar.
92% of bondholders took the deal.
Paul refused.
He took the fight global, suing Argentina and attempting to seize their assets - from central bank reserves to pension funds - in order to get the debt repaid in full.
It wasn’t working.
So Paul made an audacious move...
When an Argentine naval vessel called ‘The Libertad’ approached a port in Ghana, it was met with an unexpected standoff.
Paul had secured a court order to seize the ship.
His hedge fund was demanding a $20 million payment from Argentina before it was released.
News of the seizure sparked outrage across Argentina.
Their Minister of Economy called it “an affront to national sovereignty”.
The Argentine President said: “They can keep the frigate, but not the dignity of the Argentine Republic!”.
Paul remained silent throughout the ordeal, but just prior to the stand-off had publicly stated:
“Sovereign nations must be held to the same standards as individuals when it comes to repaying debts.”
The ship was eventually released, but the move sent shockwaves through bond markets.
Just over 15 years after his initial $100 million investment in Argentinian sovereign debt, the government finally agreed to settle and paid $2.4 billion to Paul’s firm.
Paul guards his privacy fiercely and gives very few interviews, but a journalist once asked him if these kinds of legal skirmishes were fun...
He stopped, raised his eyebrow, then turned to the journalist:
“Fun? Skiing is fun...this is work!”
Recommendation’s
Paul rarely gives interviews, so check this one out from earlier this year with Nicolai from NBIM. Or here for the original BBC article of the ARA Libertad’s homecoming in 2013.
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Joseph Cass