NML Capital, a unit of billionaire Paul Singer’s hedge fund Elliott Management Corp., has started a probe into Argentina’s latest attempt to issue local-law bonds.
NML sent a letter to Deutsche Bank AG seeking information on the local debt sale planned for Tuesday and whether the bank is offering the bonds to investors outside the country, according to a person familiar with the matter who asked not to be identified because the information is private.
The hedge fund is trying to limit the nation’s ability to raise money offshore in an effort to pressure Argentina to comply with a court order that requires it to repay NML and other holders of defaulted bonds from 2001. A federal judge in New York said last month that Argentina can’t make payments on notes issued to global investors, even if those securities were sold under domestic law, until NML and other holdout creditors who sued for full repayment get the $1.7 billion they’re owed.
“Those contemplating participation in Argentina’s latest attempt at a global offer should understand that it appears to have all the hallmarks of external indebtedness that is covered by our pari passu rights,” Robert Cohen, an attorney for NML, said in a statement Tuesday. “We are closely scrutinizing this highly unusual transaction to determine what enforcement actions are appropriate.”
Stephen Spruiell, a spokesman for NML, and Kerrie McHugh, a spokeswoman for Deutsche Bank, had no immediate comment on the letter to the bank. A press official at the Argentine Economy Ministry declined to comment.
Argentina said it planned to auction Tuesday $500 million of local-law bonds due 2024, without using banks as intermediaries. Buyers must have accounts registered with the local securities regulator or express “timely interest” with parties that have such accounts, according to a statement announcing the sale.
Since June, the government of South America’s second-biggest economy has been blocked by U.S. courts from making payments on international bonds issued in two debt restructurings stemming from its 2001 default on $95 billion of debt. Last month, U.S. District Judge Thomas Griesa said that local-law securities that had been issued as part of a global exchange offering to investors around the world constitute external indebtedness and are subject to his previous rulings.
In February, NML thwarted a separate attempt by international banks to help raise money for Argentina. Deutsche Bank and JPMorgan Chase & Co. halted plans to issue more than $2 billion of the local-law bonds due 2024 after Griesa asked the banks to produce documents related to the sale, which had been marketed to non-U.S. investors.
The bar to prove that the securities auctioned today constitute foreign indebtedness “may be low,” according to Barclays Plc economist Sebastian Vargas.
NML may just need to show Griesa that the bonds were “offered abroad or that the authorities did not prevent international participants from taking part in the issue,” Vargas wrote in a report Tuesday.