A dramatic stand-off is taking place between a US vulture fund and the independent nation of Argentina over its 11-year old defaulted bonds – in the port of Tema in Ghana. The month long seizure of the ARA Libertad, an Argentine naval vessel, has no end in sight as Argentina refuses to pay a $20M bond demanded by a US Vulture Fund to have the ship released as part payment on that nation’s junk bonds.
The crisis has now caught the attention of the international trade union movement. The International Transport Workers Federation (ITF) has unanimously condemned the seizure at its Executive Board meeting in October in Copenhagen. The vulture fund in question is none other than Elliot Management Corp, majority shareholder (22%) in UK passenger transport multinational National Express (NEX) – and seen as a prime mover in that company’s union busting stance in its US yellow school bus operations. ITF affiliates include US International Brotherhood of Teamsters (IBT) who are battling to secure union rights for thousands of NEX employees in their Durham school bus subsidiary in a joint campaign with UK union UNITE.
The ITF is no stranger to conflicts with international capital. Frequently the ITF is called upon to rescue distressed seafarers left stranded around the world, sometimes owed months of wages by huge wealthy ship-owners. The ITF is frequently engaged in major international battles with multinational capital which may respect union rights in its home country but fires trade union activists in other countries. A current ITF campaign involves multinational giant DHL whose subsidiary has sacked over 20 trade union activists in Turkey. When ITF came to the defence of Finnish seafarers who lost their jobs a few years ago to lower paid Estonian seafarers on the Viking ferry service linking Finland and Estonia, the owners took ITF to court – and sued them for breaching capital’s “economic freedom” to move labour, which led to the infamous anti-union Viking judgment at the EU Court of Justice.
Elliot Management Corp, led by US billionaire financier Paul Singer is no friend of trade unions and working people – or poor countries who have been crippled by debt in our 21st century global capitalist system. Elliott has donated millions of dollars to US Republican causes and has made a substantial donation to Mitt Romney’s Presidential campaign. Among lobbying issues it has funded in the US are for lower top rates of tax and for regulations favoring hedge funds like Elliott, including the right to claim payment in full – with interest – on defaulted foreign government bonds.
It is precisely this line of business that has made Elliot one of the most profitable global capitalist institutions, with average annual returns of a staggering 14%. Buying up defaulted government bonds of the world’s poorest countries and reclaiming their value in full – with interest! – is one of Elliot’s most lucrative activities. In 1995 Elliot bought distressed Peruvian debt just over $11M but successfully sued that nation for $58M. Returns were even better when Elliot’s subsidiary Kensington International bought Congo-Brazzaville government bonds at a knock down price of reportedly $20M and sued for £90M with interest.
Elliot also made massive profits from purchases of junk bonds (bought mostly at 20c on the dollar of their face value) from Delphi Automotive, US auto components firm, which filed for bankruptcy in 2005. In July 2009, Paul Singer’s hedge fund group won control of Delphi and refused to either make up the $7B shortfall in the pension fund or pay any more US workers pensions. In 2009, no US Government bail-out of GM or Chrysler could have been successful without saving Delphi, which received more than $12.9B in taxpayer-backed loans. At that time Delphi employed 25,000 union workers. The original US bail-out plan would have saved 14 US plants and returned key component production to GM’ direct control but it was scuppered by the hedge funders who demanded double the price the Treasury would pay for their “junk” bonds. Elliot’s profits from that bail-out are estimated at $1.28B, yet not a single US union production worker now remains. Out of 29 US plants only 4 remain employing 5000 workers, as production was rapidly shifted overseas – to China where 100,000 workers are employed to make those same automotive components. Mitt Romney’s wife Ann invested “more than $1M” with Elliott via her blind trust – the minimum disclosure required by law – which means their smallest possible gain was $10M.
Back in the Ghanaian port of Tema, there is little end in sight of the current impasse. Elliott’s subsidiary NML Capital Ltd tracked the ARA Libertad on route to its courtesy call to Ghana where it successfully filed for an injunction to hold the Argentine vessel until a payment of approx $20M is made. True to form, Elliott is seeking repayment in full of $172 million of Argentine debt bought in 2001for 15–30 cents on the dollar. According to court documents, Singer’s NML subsidiary claims to hold Argentine bonds with a face value of $630 which they now say are worth $2.3B with accrued interest. Argentina defaulted on $82 billion in dollar-denominated debt and devalued its currency in 2002. Talks with investors began in 2005, when Argentine President Nestor Kirchner offered 30 cents on the dollar to buy back the bonds, which has been agreed by 93% of Argentina’s creditors.
The Ghanaian court ruling came on the back of a New York court decision in Elliot’s favour in February 2012. But this is not supported by the US Government. In a document, issued in April 2012, named “Amicus Curiae” President Barack Obama’s administration urged the US Circuit Court of Appeals in New York to reverse rulings directing Argentina to make payments to Elliott Management Corp.’s NML Capital Fund as “it could enable a single creditor to thwart the implementation of an internationally-supported restructuring plan, and thereby undermine the decades of effort the United States has expended to encourage a system of cooperative resolution of sovereign debt crises.”
It is clear this attack on Argentina’s sovereignty is in nobody’s interest accept Paul Singer’s and his multi-billion fund vulture fund operation. It cannot be right that an independent capitalist institution can not only undermine international debt restructuring efforts with impunity – and at massive profits to itself – and also interfere with the very sovereign independence of Argentina itself. Argentina is currently taking a case to the International Tribunal on the Law of the Sea at Hamburg, claiming that the seizure of their vessel is illegal in maritime law.
The international trade union movement is siding with the Argentinean people and their trade unions on this issue. The ITF is calling for solidarity messages and letter of protest from trade unions and civil society organisations so that massive international pressure is brought to bear to bring Paul Singer, Elliot and NMC Corp to heel. With other countries – such as Greece perhaps? – likley to take a similar course in the future, how can rogue capitalist vulture funds like Elliot be allowed to get away with it, and cause international financial chaos in their single mind greed for excessive profit?We cannot let rampant vulture fund capitalism win the day.
Martin Mayer is UNITE Executive Council member for Passenger Transport and Chair of ITF Road Transport Section