Perry Capital Said to Sell Almost Half of Argentine Bonds

  • Move comes after hedge fund sold entire stake in YPF shares
  • Fund locks in profit on notes boosted by election outlook

Perry Capital, the $10 billion hedge fund holding Argentine debt that fell into default last year, sold almost half of its stake in the bonds after they surged about 40 percent over the past three years, according to a person familiar with the matter.

The fund sold part of its position in the euro-denominated notes over the past six months to take profits generated by speculation that Argentina’s next president, who takes power in December, will resolve the nation’s second default in 13 years, said the person, who asked not to be identified because the information is private. Michael Neus, general counsel for Perry, didn’t return a phone call and e-mail seeking comment.

Perry was one of the first of several hedge funds to buy Argentine bonds after a U.S. Appeals Court in October 2012 upheld an order to block the country from making payments on its overseas debt until holders of defaulted bonds from 2001, led by Elliott Management, were paid in full. While the ruling ultimately triggered another default in July 2014 because Argentina wouldn’t obey, bonds have rallied to multi-year highs as President Cristina Fernandez de Kirchner’s final term in office draws to a close.

The hedge fund is involved in a lawsuit in London with bond trustee Bank of New York Mellon Corp. that seeks to release the blocked interest payments on Argentina’s euro-denominated bonds. Perry, based in New York, sued in August 2014 alongside George Soros’s Quantum Partners, Kyle Bass’s Hayman Capital Management, and Knighthead Capital Management. The group collectively held 1.3 billion euros ($1.5 billion) of bonds at the time of the original court filing.

Perry continues to own a little more than half of its previous position in euro bonds due 2033, according to the person. Those securities fell as low as 47 cents on the euro in November 2012, and reached an eight-year high of about 98 cents in April.

The hedge fund isn’t the first to take profits on the investment ahead of elections. Bloomberg reported in December that Fir Tree Partners liquidated its Argentina fund after generating an annualized net return of 20 percent for investors over a span of 19 months.

In the first three months of this year, Perry also sold its entire stake in state-run oil producer YPF SA, filings show. YPF’s American depositary receipts fell 20 percent in 2014 amid the global rout in oil, and reached a two-year low of $14.91 on Monday.

Perry’s main fund lost 3.4 percent last year after returning 21 percent in 2013, according to a person with knowledge of its returns who asked not to be identified because the information is private. Earlier this month, Bloomberg reported that Chief Investment Officer David Russekoff left the company, and that an investment committee was created to replace him. The committee includes Todd Westhus, Maulin Shah and Todd Gjervold.

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