The Vultures vs. The Delinquent Sovereign – The Fight over Argentine Bonds in NML Capital Limited vs. Republic of Argentina
by Kiran H. Mehta, Thomas F. Holt, Kristen L. Schneider
In 2001, the Republic of Argentina defaulted on over $100 billion worth of sovereign bonds. Under a restructuring program, a majority of the bondholders agreed to accept a 75% “haircut”.
However, a minority group, including some hedge fund creditors, refused the deal and is seeking to collect monies owed under the 2001 default. The case has received considerable coverage. In this analysis, the case examines the broader issues surrounding sovereign debt and the remedies available to creditors.
Rather than focusing on the state as investor, this article considers the implications to institutional investors of the sovereign as creditor. Holders of sovereign debt face a risk that creditors of private enterprises do not: a defaulting sovereign can close its courts to its creditors as they seek to collect what is indisputably owed them.