The Vulture Funds and the Argentine Sovereign Debt Default

Vulture funds in the sovereign debt market create confusion and uncertainty in the global financial system because of their predatory behavior and litigation tactics. With Argentina failing to make a payment on some of its outstanding sovereign debts on July 30, 2014, for the second time since 2001, it became a serial defaulter and attracted global attention. Though Argentina had been involved in seven defaults from 1827 to 2001, these had been mostly self-inflicted. The 2014 default, on the other hand, seemed to be due to a sudden shift in the international sovereign debt regime in favor of the ‘holdouts’ governed by US laws. Considered the ‘sovereign debt trial of the century’, Argentina continued to fight the legal battle against the vulture funds in the US courts to uphold its sovereign debt restructurings. The key dimension of its sovereign debt default resolution mess was the role played by the vulture funds led by NML Capital founded by a Cayman Islands-based offshore unit of Paul Singer's Elliott Management Corporation.