Paul Singer certainly had a lot of fun with Argentina a few years ago. But while Elliott Associates made a not particularly small, albeit painfully patient, fortune by combining the lack of a collective action clause in the country’s defaulted debt with the pari passu boilerplate no one had previously bothered to read, let alone take seriously, every sovereign nation on earth learned an important lesson, which was to make goddamned sure to include the former in all future issuance, unless you are, for some reason, Jamaica, so as to be able to impose your restructuring terms on any hedge fund who might want to hold out which 99.9% of your other creditors thirst eagerly for however many cents on the dollar you’re willing to pay out.
Of course, given the often rather lengthy terms, there’s still plenty of foreign debt out there lacking the all-important CACs, and thus the potential that Singer could yet seize the flagship of some future uniquely recalcitrant sovereign debtor. This does not sit well with some of the people who run New York State, under whose laws half of the world’s sovereign debt is governed. So they’d like to do those countries a favor by inserting a collective action clause into their bonds ex post facto. And a few other small inducements not to hold third-world countries over a barrel for kicks, as well.
New York state Sen. Gustavo Rivera and Assemblywoman Maritza Davila, both Democrats, plan to introduce legislation as soon as this week to allow a supermajority of a nation’s creditors to amend or restructure its debt contracts and bind any dissenters that could otherwise hold out…. Bill components also include giving new lenders priority over a nation’s existing creditors, mandating an audit before any restructuring, and empowering the New York State Department of Financial Services to oversee elements of the negotiating process. Other provisions aim to restrain hedge funds from purchasing sovereign bonds for the purpose of seeking a profit through litigation.
Of course, such a law would be vulnerable to the same arguments made against Greece’s belated addition of CACs into its bonds, an addition ruled a default in and of itself by S&P, that changing the rules after the fact is a human rights violation, as well as falling afoul of the U.S. Constitution’s fetish for contractual supremacy. Still, even if it is to stand in its entirety, Paul Singer has found another way to amuse himself, this time not by showing the way but by leaping on the rather overflowing bandwagon.
The firm, founded by billionaire Paul Singer, has been meeting with bankers about raising more than $1 billion for a special purpose-acquisition company…. Assuming Elliott moves forward, it could use the proceeds to buy a sizable company—potentially worth double-digit billions based on the targets similarly sized blank-check companies have agreed to combine with….
Elliott, with roughly $42 billion under management, has run campaigns at companies as diverse as AT&T Inc. and Marathon Petroleum Corp. in recent years. Its private-equity affiliate, Evergreen Coast Capital, focuses on technology, having previously participated in the acquisitions of health-care software firm Athenahealth Inc. and business-software company LogMeIn Inc. Elliott also bought bookseller Barnes & Noble Inc. in 2019.