Effects of Argentina's debt default lingering on as Ghana impounds ship at request of creditors


The continuing fallout from Argentina’s historic debt default of 2001 has landed the country in a diplomatic stand-off with Ghana after the west African country impounded one of its naval vessels at the request of US holders of its defaulted debt.

The frigate Libertad, a tall ship used as a training vessel and the pride of the Argentinian navy, which has visited Ireland several times, has been held in the port of Tema since October 2nd at the request of US hedge fund NML Capital. The fund, owned by billionaire Paul Singer, says it is owed $370 million by Argentina and wants $20 million in order to release the Libertad.

Argentina has accused Ghana of breaking maritime law by impounding the vessel and has vowed to take the case to the International Court of Justice in The Hague and the United Nations. Buenos Aires is also demanding Ghana give a “solemn salute” to the Argentinian flag to repair the “moral damage caused”.

Earlier this month sailors on board the Libertad drew guns to prevent harbour authorities from moving the ship to a less busy section of the port. In retaliation the ship’s water and electricity supplies have been cut, a move described by Argentina’s defence minister as “a violation of the most basic human rights”.

Argentina’s president, Cristina Kirchner, has dismissed NML Capital as a “vulture fund”. She says holders of the country’s bonds were offered restructuring deals in 2005 and 2010.

But NML Capital is part of a group of hold-outs with about $8 billion of debt who refused the terms of the restructuring, which imposed losses of more than 65 per cent on bondholders.

Vulture funds

NML Capital won a ruling in a New York court that allowed it to pursue Argentinian assets in foreign jurisdictions in order to recover its debt.

The defaulted bonds held by it were issued under US jurisdiction.

The dispute could even provoke a new technical default of Argentinian debt as the government in Buenos Aires looks for ways to prevent debt repayments due to be sent abroad to those who took part in the restructuring deal being seized by the hold-outs.

That could further alienate capital markets and delay Argentina’s return to international financing, closed to it since the 2001 default.

“Internally President Kirchner has done a good job of painting the hold-outs as vulture funds. But externally the main impression now is that Argentina is a rogue country,” says Hans Humes, co-chairman of the Global Committee of Argentina Bondholders which represented holders of the country’s defaulted bonds in debt restructuring negotiations.

Last month the Argentinian province of Chaco technically defaulted on its debt when it ran out of dollars due to the national government’s restrictions on the buying of foreign currency.