US hedge fund seizes Argentine naval ship

The ARA Libertad is now the property of Elliott Capital Management.

An American hedge fund has seized a ship owned by the Argentine navy from a Ghanaian port, as part of an attempt to collect on bonds purchased after Buenos Aires defaulted in 2001.

The fund, Elliott Capital Management, has been engaged in a long-running legal battle with the Argentine government. It specialises in what is euphemistically termed "distressed debt" – it buys up bonds held by countries which are extremely likely to default, or which have already defaulted. As a result, it gets them for a pittance, around one fifth of face value.

The strategy from there is to refuse to accept the default. If it does not voluntarily enter into any debt-swaps, then the company can continue to claim it is rightfully owed the full amount on the bonds. If, eventually, it gets paid, a massive profit has been earned.

This tactic has led to Elliot, and other funds which operate in a similar manner, being dubbed a "vulture fund", profiting from dead or dying economies. The firm itself insists it only takes action against countries that can afford to pay, but choose not to.

The decade-long fight to recover the face value of the Argentine bonds has been carried out on a number of battlefields, from the US Courts to the World Bank (£), but the latest turn is the most nautical of them all.

The seizure, of a 100m-long tall ship staffed by 200 sailors, appears to have been planned for some time by Elliott. The FT reports (£):

Elliott had been waiting for the ship to stop in a port where it would have a chance to enforce legal judgments previously awarded by UK and US courts. The hedge fund declined to comment. . .

US and UK courts have awarded $1.6bn in claims in [Elliott's] favour, but Argentina has taken a tough line on lingering holdouts, saying there will be no further offers.

If a US court ruling from February 23 is upheld on appeal, Argentina must pay interest to Elliott before making any payment to holders of bonds issued in the 2005 and 2010 swaps. An appeals ruling has not yet been issued.

The Libertad, which Elliott expects to be awarded ownership of, has been estimated in value at between $10m and $15m.

The vessel, a tall ship used by the Argentine Navy to train sailors and a former holder of the world speed record for a transatlantic crossing by sail, was on a graduation tour. It is free to leave the Ghanaian port of Tema if Buenos Aires posts a bond with the court, which Elliott would then also seek to recover.

In the long-run, Elliott will still rely on winning court cases to pressure the Argentine government into paying the outstanding loan in cash, rather than boats.

The ARA Libertad in better days. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Jeremy Corbyn challenged by Labour MPs to sack Ken Livingstone from defence review

Former mayor of London criticised at PLP meeting over comments on 7 July bombings. 

After Jeremy Corbyn's decision to give Labour MPs a free vote over air strikes in Syria, tonight's Parliamentary Labour Party (PLP) meeting was less fractious than it could have been. But one grandee was still moved to declare that the "ferocity" of the attacks on the leader made it the most "uplifting" he had attended.

Margaret Beckett, the former foreign secretary, told the meeting: "We cannot unite the party if the leader's office is determined to divide us." Several MPs said afterwards that many of those who shared Corbyn's opposition to air strikes believed he had mishandled the process by appealing to MPs over the heads of the shadow cabinet and then to members. David Winnick declared that those who favoured military action faced a "shakedown" and deselection by Momentum activists. "It is completely unacceptable. They are a party within a party," he said of the Corbyn-aligned group. The "huge applause" for Hilary Benn, who favours intervention, far outweighed that for the leader, I'm told. 

There was also loud agreement when Jack Dromey condemned Ken Livingstone for blaming Tony Blair's invasion of Iraq for the 7 July 2005 bombings. Along with Angela Smith MP, Dromey demanded that Livingstone be sacked as the co-chair of Labour's defence review. Significantly, Benn said aftewards that he agreed with every word Dromey had said. Corbyn's office has previously said that it is up to the NEC, not the leader, whether the former London mayor holds the position. In reference to 7 July, an aide repeated Corbyn's statement that he preferred to "remember the brilliant words Ken used after 7/7". 

As on previous occasions, MPs complained that the leader failed to answer the questions that were put to him. A shadow minister told me that he "dodged" one on whether he believed the UK should end air strikes against Isis in Iraq. In reference to Syria, a Corbyn aide said afterwards that "There was significant support for the leader. There was a wide debate, with people speaking on both sides of the arguments." After David Cameron's decision to call a vote on air strikes for Wednesday, leaving only a day for debate, the number of Labour MPs backing intervention is likely to fall. One shadow minister told me that as few as 40-50 may back the government, though most expect the total to be closer to the original figure of 99. 

At the end of another remarkable day in Labour's history, a Corbyn aide concluded: "It was always going to be a bumpy ride when you have a leader who was elected by a large number outside parliament but whose support in the PLP is quite limited. There are a small number who find it hard to come to terms with that result."

George Eaton is political editor of the New Statesman.