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.

Getty
Show Hide image

However Labour do on Thursday, Jeremy Corbyn's still the right leader

When the Blairites talk about winning by appealing to the country, what do they mean?

Commentators have spent the last few weeks predicting exactly what will happen on Thursday and, more importantly, what the results will mean. One thing is certain: no matter what the Labour party achieves, Jeremy Corbyn’s position is safe. Not only is the membership overwhelmingly supportive of the leader, but also Blairites would be foolish to launch an attack with the European referendum just over a month away.

So whatever happens on Thursday, Jeremy Corbyn’s position will be as secure as it is at this exact moment in time. I want to go further than explaining simply why whatever happens on Thursday will not spell the end for the Labour leader by arguing why, in any case, it should not.

Jeremy Corbyn was elected leader of the Labour party with an astonishing mandate. Paid-up Labour party members, Labour supporters and Labour affiliates gave this to him. Polling consistently showed that the ability to ‘win’ elections was not the reason people voted for Jeremy. I don’t think that the Labour leader’s opponents are accurate in suggesting that this is because Labour supporters are self-confessed losers. In many ways we are the realists.

I am perfectly aware of the current political ground. The country is largely opposed to accepting more refugees. People who rely on state benefits have been stigmatised. Discrimination is rampant within our society. A majority of people are found to oppose immigration. So when the Blairites talk about winning by appealing to the country, what do they mean exactly? I’m sure that even Liz Kendall would not have mounted an election campaign that simply appealed to the way issues were seen in the polls.

Jeremy Corbyn inherited an uphill battle; he didn’t create it. Anyone who suggests so is shamelessly acting so as to discredit his leadership. Labour’s message is of equality and solidarity. Our party proudly stands as an institution that seeks to pull down the barriers that bar the less privileged from achieving. But when the nation is gripped by the fear of the ‘other’ and man has been pitted against woman in a war of all against all how can Labour’s message break through?

The answer is time. Labour needs time to rebuild and assess the situation on the ground. Labour needs time to talk to people. Labour needs time to change the frame of the debate and the misleading narrative that the Tories are proud to spout because it wins them votes. The Labour party is better than that. We have to be better than that. If we are not then what is the point in the Labour party at all?

The idea that Jeremy Corbyn could possibly change the entire narrative of the nation in 8 months is laughable. But he has started to. People have seen through the Tory lies of helping those in work get on. People have seen the government cut support for the poor while giving to the rich. At the same time they have been fed lies about the Labour leader. Jeremy Corbyn is an extremist. Jeremy Corbyn is too radical. Jeremy Corbyn is a friend of terrorists. Jeremy Corbyn wants to disband the army. Jeremy Corbyn wants to talk to ISIS. Jeremy Corbyn hates Britain. And so on.

In such an environment how is it surprising that after just 8 months Labour may not make huge gains across the country? It is likely that people will call for Jeremy to resign. When they do, ask what Andy, Liz or Yvette would have done differently. They would have needed time too.  

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.