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Capital Markets

Argentina: New task force to lobby US

Holdouts from debt restructuring try new line of attack.

As Argentina’s post-default economic miracle continues – the economy is expected to grow at 9% in 2006, and could repeat the performance in 2007 as well – the 2001 default and subsequent debt restructuring is fading ever further into history.

International investors are snapping up the bonds not only of the sovereign but of the provinces as well.

Amid the economic euphoria, one group of investors is feeling rather left out: the holders of original, defaulted Argentine bonds that declined to enter into the country’s debt exchange. Judge Thomas Griesa, the federal judge hearing most of the US bondholders’ litigation, has generally not given them what they’ve wanted – so they’ve now decided to set up a parallel effort in Washington, trying to get the attention of policymakers and legislators.

Vultures

The entities leading this effort are all hedge funds with a long history of investing in emerging market distressed debt, such as Elliott Associates, Greylock Capital Management, Gramercy Advisors and GMO. These “vulture investors”, as they are colloquially known, have historically done very well out of refusing to participate in sovereign debt restructurings. All the sovereigns that have defaulted on international bonds, from Ecuador to Uruguay, ended up paying off their holdouts in full.

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