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.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.