[jeffkrol]

The "Argentine game"............continues...........
Argentina's 11-Year War With Hedge Funds - Businessweek

“My view is that Argentina will stand more defiant than ever but at the same time, it will do whatever it can to make sure to keep servicing their debt and show the world community that they are the victims and that the ‘vulture funds’ are the bad guys,” says Santiago Maggi, managing partner with Latmark Asset Management in Miami.

“Without accessing capital markets, we have been punctually paying since 2005 with our own resources and we are going to continue to do so because we are going to honor our obligations as corresponds to a country that has recovered its self-esteem,” Kirchner said in a speech earlier this week.

Can she hang on long enough to be kept to her word? On top of legal and frigate-forfeiture problems, Argentina is mired in a deep recession marked by growing labor unrest, high inflation, and declining infrastructure.

Which, depending on Kirchner’s read, could call for more sticking it to los capitalistas.

"The momentum slowed but it doesn't change the court's ruling in Elliott's favor," said a source close to the fund who requested anonymity.

A U.S. appeals court on Wednesday issued an emergency stay order blocking, at least through February, a lower court's previous order that Buenos Aires make a $1.33 billion payment by Dec. 15 to so-called holdout investors such as Elliott.

The fund is owed roughly $665 million, or half of the court-ordered payment due to a wider group of holdout investors. They refused to accept losses on bonds imposed by the South American country in debt restructurings after its historic $100 billion default in 2002. They have been fighting to be paid in full ever since.

Elliott is believed to have bought most of its Argentine bonds at steep discounts after the default.

The returns could be spectacular, even considering the hefty legal fees Elliott has racked up.

"Elliott could make 10 times their original investment," said Russ Dallen, head of Caracas Capital Markets, a Venezuelan-based investment bank that trades Latin American debt.

He based his estimate on an assumption that Elliott bought the highest-yielding Argentine bonds for a quarter of their face value - levels where they traded in the years after the default - and manages to get paid not only for the bond's original full value but accrued interest too.

Elliott's analysts typically scour the small print of bonds sold by countries and companies that fall into financial trouble for any loopholes that could bring them returns. They see profit where others see risks that are too high to stomach.

There is precedent for paying holdouts even after a restructuring is sealed. Most recently, Greece paid 435 million euros to holdout investors after it restructured its debt. Singer's fund could be eyeing an even bigger windfall.

It holds an additional $1.6 billion bonds covered by other favorable judgments handed down by U.S. District Court Judge Thomas Griesa.
If it wants to settle all its claims in one go, the fund will have to get Argentina to the negotiating table first.
Elliott would consider accepting a combination of cash and bonds to settle the dispute, said another source familiar with the case, adding: "That's how these things usually work."

There is another potential way for funds like Elliott to cash in on the Argentina stand-off: building up a big position in credit default swaps that would pay out if the country were unable to keep up payments on its restructured debt.

Argentina has accused Elliott of trying to engineer a default to profit from CDS. But one of the sources familiar with the case said Elliott no longer holds a position in Argentine CDS, let alone one big enough to make up for its investments.

Even with billions in legal judgments in its favor since embarking on a global pursuit for Argentine assets, Elliott has managed to collect just a tiny fraction of its claims. In one of the more bizarre twists in this legal battle, Elliott recently persuaded Ghana to detain an Argentine naval training vessel in an effort to extract cash from Buenos Aires.

For Argentina holdout fund, a decade's pursuit may pay off | Reuters