Elliott Argentine Bond Bid Wins Vote of Ex-Bush Official

Elliott Management's Paul Singer
Paul Singer, founder and president of Elliott Management Corp. Photographer: Jacob Kepler/Bloomberg

Elliott Management Corp., the hedge fund founded by billionaire investor Paul Singer, won support from a former official in President George W. Bush’s administration as it seeks payment on bonds Argentina defaulted on in 2001.

Kenneth Dam, who was deputy U.S. Treasury secretary under Bush, urged the U.S. Court of Appeals in New York last month to uphold rulings directing Argentina to settle in full with Elliott’s NML Capital unit when it makes payments on bonds issued in 2005 and 2010 restructurings. The court is scheduled to hear oral arguments on the appeal the week of June 18.

Dam’s “friend of the court,” or amicus, brief follows one filed in April on behalf of the Argentine government by the U.S. Justice Department, which said lower-court rulings in favor of NML’s so-called pari passu argument could hurt other restructurings by rewarding investors who hold out while punishing participants.

“Elliott is presumably trying to offset the Justice amicus brief by bringing in a former Treasury official,” said Mark Weidemaier, a law professor at the University of North Carolina at Chapel Hill who conducts research on international financial contracts.

NML Capital has won five judgments totaling $1.6 billion and has six other lawsuits pending judgment, according to court filings. The fund has yet to receive any payout from its Argentina-related court awards.

‘Pari Passu’

Manhattan U.S. District Judge Thomas P. Griesa’s Feb. 23 ruling, which Argentina is appealing, interprets “pari passu” clauses in sovereign debt contracts to mean that NML Capital’s judgments related to defaulted debt should be treated with equal ranking as restructured debt.

Dam wrote in his brief that collective action clauses, which allow a defined majority of bondholders to impose debt restructuring terms on all bondholders, have eliminated the threat from holdouts.

“The U.S. expresses concern in its brief that the district court’s ‘equal treatment’ interpretation of the pari passu clause will negatively affect the ability of countries to restructure their debt,” Dam wrote. “Given the widespread prevalence today of collective action clauses -- about 83 percent of the presently outstanding bonds of foreign sovereigns issued under New York law contain them -- this concern has no real basis.”

Solicitor General

Dam, now a professor emeritus at the University of Chicago Law School, has also held positions in the U.S. State Department and the White House Office on Economic Policy, according to his filing. Former Bush U.S. Solicitor General Theodore Olson, now a lawyer at Gibson Dunn & Crutcher LLP, is representing Singer’s fund before the appeals court.

Dam didn’t return a phone message and e-mail sent to his law school office seeking comment on the filing. Peter Truell, a spokesman for New York-based Elliott Management, declined to comment.

Carmine Boccuzzi, a lawyer with Cleary Gottlieb Steen & Hamilton LLP representing Argentina, didn’t immediately return a call seeking comment.

The case is NML Capital Ltd. v. Republic of Argentina, 12-00105, U.S. Court of Appeals for the Second Circuit (Manhattan).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE