The Vulture Funds and the Argentine Sovereign Debt Default

Case Code: ECON052 Case Length: 21 Pages Period: - Pub Date: - Teaching Note: Available

Price: Rs.500 Organization : - Industry : Financial Services Countries : - Themes: Sovereign Debt Default and the Problem of Holdouts

Abstract Case Intro 1 Excerpts

Introduction

In June 2014, Argentina defaulted on its sovereign debt once again. This was the second time it had done so since the 2001 sovereign debt crisis . The financial world was stunned not just by the default itself, but also by the fact that a few ‘holdouts ’ were keen to torpedo Argentina’s debt restructuring. With the US Supreme Court siding with the holdouts (mostly hedge funds) and ordering that Argentina pay the hedge funds the full principal with interest disregarding the debt restructuring entered into by Argentina, an unprecedented leverage was given to the holdouts to abuse the borrowing sovereigns and global financial system...

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