Buying speculative hedge funds debt of Ukraine is fraught with serious problems in the near future
Have you ever heard of Paul singer and his hedge Fund Elliot? He refers to a special kind of business, called vultures, according to Wave.
Why vultures? He specializiruetsya on the purchase of sovereign debt of countries that are in a state of preddefoltnom. Because, as a rule, in this time of rising interest rates on bonds and they are traded much cheaper than face value. And when other private investors prefer to stay away from such bonds appears on the scene, the players in the likeness of Paul, and buying these bonds, with the aim to demand from the government a refund in full. In their approach, they are somewhat similar to our collectors.
For the first time the singer has tried this method in 1996, when it bought the debt of Peru for 10 million Then he won a lawsuit on that debt at $ 58 million. Returned the money rather non-trivial way. When President Fujimori tried to leave the country because of allegations of corruption, the singer gave him his plane in exchange for what the President will pay this amount from the state Treasury.
By the way, reading about Fujimori, I have a strong feeling of deja vu. Judge for yourself why. In a coup, dissolved the Parliament, which prevented him to carry out neoliberal reforms, and secured the authoritarian government. During his reign was created the cult of personality of the President that called Fujimorism. As a result of reforms reduced the bureaucracy and reduced government spending. Increased reserves from zero to 10 billion dollars. The large-scale construction of roads. When it started to develop tourism, agricultural and mining. And thus he became one of the most famous of the corrupt world. The singer also saved him from prison.
More serious Kush singer ripped off when he bought the debt of the Congo for 30 million dollars, while the nominal value of debt was estimated at 400 million Then, saying he had received around 130 million.
The best deal he did with Argentina. During the economic difficulties of the country in 1999-2002, the singer is actively buying depreciating bonds of this country. He then said that he bought them at an average price of 22 cents per dollar. According to various estimates, he bought securities with the face value, which ranged from 500 million to 1 billion And he paid for them only 100-200 million dollars. When Argentina restructured, offering to buy the paper for 30% of the nominal value, he refused the offer and said that will force Argentina to pay the debt in full. As a result of long judicial proceedings, in February 2014 the amount of the claim singer to the government of Argentina increased to 3 billion dollars, then for Argentina meant the default! In many of the world’s leading publications began to come out of the article as a hedge Fund can bankrupt the whole country. In the end, resulting in a 15 year struggle with the government of Argentina, the Fund singer received us $ 2.4 billion.
His credibility and professionalism is so high that when carried out a restructuring of Greek debt, the Greeks feared him like the plague and tried to take into account Argentinean bad experience. And the singer’s strategy is so successful that it are willing to queue to invest in his Fund. Some say that he once in just 24 hours attracted to your Fund $ 5 billion from private investors. For America it is a small amount. But for underdeveloped countries, because of its approach, this amount can be put on his knees the entire state. Incidentally, the size of the Fund is estimated at 35 billion dollars.
Here are the cruel modern realities preddefoltnom States. Many of you now think that such funds do not threaten us. Want to disappoint you.
In 2005, mark Brodsky, a former employee of the previously described Fund Elliot, he founded his own accounting hedge Fund Aurelius.
Guess whose debt it has purchased? True, the Ukrainian debt. By 2015, the Fund has accumulated Ukrainian debt with a nominal value of 500 million dollars. They say that he bought it for 35 cents on the dollar. Apart from him, another hedge Fund has bought Ukrainian bonds, was the infamous Elliot.
During the restructuring of Natalia Yaresko, these funds have tried to block the deal on debt restructuring Ukraine. Because they believed the terms of the deal are unfair.
And this is considering the fact that they bought these bonds at 35 cents on the dollar, and the restructuring terms, they could get 80 cents on the dollar. That is the double profit. However, as in the case of Argentina, this was not enough for them and the Fund wanted to get the maximum.
According to some information, the Fund still made a deal with the Ukrainian government and he managed to negotiate a separate agreement under which he received 100 cents on the dollar. That is, in fact full par value.
Given the significant debt burden on the budget, and that Ukraine may again face default in the future, I think we will hear about the Fund.