Hedge Fund Vultures In Puerto Rico

[dismal]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

*gasp*

The horror.

 

[dismal]

I think that they want the close to 100% of the original debt paid to them even though they pay as low as 10% of the value of the debt.

It seems to be that they are connected to the New York financial and legal system is how they can get a good chance of getting the debt paid off at that level.

I think that transferring debt like this should be heavily regulated or not permitted at all.

Again, the people who originally issued the debt also wanted to get repaid, in full. They wanted it so much they had the issuer enter into a legally binding contract to pay the debt in full.

It's really quite bizarre that you imagine the "problem" here is that the debt was transferred. The transfer creates no new rights or obligations that didn't previously exist.

 

[repoman]

They made an investment a calculated gamble and they lost.

They probably don't have connections with The Tribe that these vulture fund managers have.

So if creditor A doesn't have political connections to force the debtor to pay and sells it to creditor B who does, what is the upshot of that?

 

[Togo]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

No, that's not what they're doing. Read the actual article.

 

[dismal]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

No, that's not what they're doing. Read the actual article.

The article may be agenda driven crap.

When you buy a bond you don't get special rights the previous holder of the bond didn't have. You get exactly the rights the bond issuer gave the bond holders when it issued the bond.

 

[dismal]

They made an investment a calculated gamble and they lost.

They probably don't have connections with The Tribe that these vulture fund managers have.

So if creditor A doesn't have political connections to force the debtor to pay and sells it to creditor B who does, what is the upshot of that?

It's no so much "connections" that creditor B has over creditor A, it's patience to deal with a work out situation and stomach for a fight. And armies of lawyers trained and experienced in the dark art of bankruptcy law.

Many traditional bond investors are not staffed to deal with workouts and would just as soon take their loss and move on.

 

[ksen]

What bankruptcy law?

 

[dismal]

What bankruptcy law?

Whichever laws apply in the relevant situation.

 

[Togo]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

No, that's not what they're doing. Read the actual article.

The article may be agenda driven crap.

Well if you'd read it, you'd know. But you haven't, have you?

When you buy a bond you don't get special rights the previous holder of the bond didn't have. You get exactly the rights the bond issuer gave the bond holders when it issued the bond.

Which is presumably why they used the political power gained by consolidating so much of the debt into one place to force the government to legally restructure the deal - to gain those additional rights.

 

[dismal]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

No, that's not what they're doing. Read the actual article.

The article may be agenda driven crap.

Well if you'd read it, you'd know. But you haven't, have you?

When you buy a bond you don't get special rights the previous holder of the bond didn't have. You get exactly the rights the bond issuer gave the bond holders when it issued the bond.

Which is presumably why they used the political power gained by consolidating so much of the debt into one place to force the government to legally restructure the deal - to gain those additional rights.

I did read the first part of the article. Not sure why you're so convinced of its value. It's obviously an agenda driven hit piece.

You are not well served by parroting its untruths.

People who acquire bonds do not have any rights the previous bond holders were not granted by the issuing entity.

They may so a better job of exercising those rights, but it's an absurdity to argue there his something even slightly wrong about that.

If you don't want to deal with bondholders exercising their rights here's a good tip: pay the bonds on time.

 

[Togo]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

No, that's not what they're doing. Read the actual article.

The article may be agenda driven crap.

Well if you'd read it, you'd know. But you haven't, have you?

When you buy a bond you don't get special rights the previous holder of the bond didn't have. You get exactly the rights the bond issuer gave the bond holders when it issued the bond.

Which is presumably why they used the political power gained by consolidating so much of the debt into one place to force the government to legally restructure the deal - to gain those additional rights.

I did read the first part of the article. Not sure why you're so convinced of its value. It's obviously an agenda driven hit piece.

You are not well served by parroting its untruths.

What have I said that's untrue, dismal? That's a pretty serious accusation, and I'm asking you to back it up.

People who acquire bonds do not have any rights the previous bond holders were not granted by the issuing entity.

No matter how many times you repeat this, it remains irrelvent to what is being discussed. The terms being discussed by the Hedgeclippers article, by Fortune, by the New York Times, are not the ones under which the money was originally lent. It is the attempts by the bondholders to change the terms that part of what is being complained about.

Do you understand how debt restructuring works? Do you understand that it involves Changing the terms of the debt?

Can you see how using the court system, to force the government, to take out new debt on more onerous terms to repay the old debt, which coincidentally happens to be from the people who own the old debt, might just be market abuse? Can you see how that gains the bondholders additional rights? What about speculating on the country's property market at the same time that you're deciding whether to trigger a default event?

I thought you supported a free market. Why are you supporting this kind of market abuse?

 

[dismal]

Which is why they're pushing for legal changes. If they were only claiming under the original terms of the debt there wouldn't be any profit for them in it. You did read the article, right?

You do realize that Puerto Rico borrowed lots of money and promised to pay it back?

Under the original terms of the loan and government yes. You do realise that debt is priced according to the expected recovery rate, and that the reason the hedge funds are seeing a profit to be made is via changing those conditions to ensure a higher repayment, in some cases higher than was the case under the original terms of the loan?

When you buy debt you get the rights that were granted to the debt holders when the debt was originally sold. No more, no less.

Yes, which is why the OP isn't about the practice of buying debt, but about the tactics used by vulture funds who acquire and consolidate such debt. Just as ksen said in post #14, as well as in the OP, and as explained in the article that we're discussing.

I would have thought that market manipulation, tax havens, using government lobbying to change debt priority in favour of certain debtors and against others in violation of the original terms of the deal, and seeking funds and financial concessions over and above the terms of the original debt, are all things that you would actually oppose. They're all violations of free and open markets.

The tactic in question being asking to be repaid as per the government's original promise and contractual obligation?

No, that's not what they're doing. Read the actual article.

The article may be agenda driven crap.

Well if you'd read it, you'd know. But you haven't, have you?

When you buy a bond you don't get special rights the previous holder of the bond didn't have. You get exactly the rights the bond issuer gave the bond holders when it issued the bond.

Which is presumably why they used the political power gained by consolidating so much of the debt into one place to force the government to legally restructure the deal - to gain those additional rights.

I did read the first part of the article. Not sure why you're so convinced of its value. It's obviously an agenda driven hit piece.

You are not well served by parroting its untruths.

What have I said that's untrue, dismal? That's a pretty serious accusation, and I'm asking you to back it up.

People who acquire bonds do not have any rights the previous bond holders were not granted by the issuing entity.

No matter how many times you repeat this, it remains irrelvent to what is being discussed. The terms being discussed by the Hedgeclippers article, by Fortune, by the New York Times, are not the ones under which the money was originally lent. It is the attempts by the bondholders to change the terms that part of what is being complained about.

Do you understand how debt restructuring works? Do you understand that it involves Changing the terms of the debt?

Can you see how using the court system, to force the government, to take out new debt on more onerous terms to repay the old debt, which coincidentally happens to be from the people who own the old debt, might just be market abuse? Can you see how that gains the bondholders additional rights? What about speculating on the country's property market at the same time that you're deciding whether to trigger a default event?

I thought you supported a free market. Why are you supporting this kind of market abuse?

I work in finance and deal with debt all the time.

I don't consider it "market abuse" for a debt holder to exercise the rights to which a debt holder is entitled.

I think it is spectacularly silly to claim it is.

 

[Loren Pechtel]

They made an investment a calculated gamble and they lost.

They probably don't have connections with The Tribe that these vulture fund managers have.

So if creditor A doesn't have political connections to force the debtor to pay and sells it to creditor B who does, what is the upshot of that?

It's no so much "connections" that creditor B has over creditor A, it's patience to deal with a work out situation and stomach for a fight. And armies of lawyers trained and experienced in the dark art of bankruptcy law.

Many traditional bond investors are not staffed to deal with workouts and would just as soon take their loss and move on.

And note that the cost of the fight is pretty much independent of the amount at stake.

Thus if one investor gobbles up a whole bunch of the debt they can afford to fight more and thus will likely see a higher % on the debt than a bunch of individuals would have.

 

[Axulus]

They made an investment a calculated gamble and they lost.

They probably don't have connections with The Tribe that these vulture fund managers have.

So if creditor A doesn't have political connections to force the debtor to pay and sells it to creditor B who does, what is the upshot of that?

It's no so much "connections" that creditor B has over creditor A, it's patience to deal with a work out situation and stomach for a fight. And armies of lawyers trained and experienced in the dark art of bankruptcy law.

Many traditional bond investors are not staffed to deal with workouts and would just as soon take their loss and move on.

They are considered vultures because they try to get the law enforced and owed the maximum allowed under the law. Ksen and others want them to just give up and walk away with a total loss instead of trying to obtain a partial recovery.

 

[Axulus]

They made an investment a calculated gamble and they lost.

They probably don't have connections with The Tribe that these vulture fund managers have.

So if creditor A doesn't have political connections to force the debtor to pay and sells it to creditor B who does, what is the upshot of that?

They haven't yet lost everything. That's why we have court systems and legal settlements to determine the outcome of these scenarios. You and others seem to be objecting to the idea that they aren't just giving up: "how DARE these vultures try to enforce the bondholder rights using the courts and legal system."

 

[Axulus]

Which is presumably why they used the political power gained by consolidating so much of the debt into one place to force the government to legally restructure the deal - to gain those additional rights.

What political power gained? What are you talking about?

Any restructuring deal is a settlement agreed upon _instead_ of fighting it out in court and letting the legal system have the final say. If you don't think the Puerto Rican government doesn't have their own army of lawyers to obtain the best deal they can in their own interests, you are quite naive indeed. It is a major ethical and criminal violation if any settlement the lswyers advise the gov't to agree to is not done in the best interests of Puerto Rico in accordance to that government's goals and desires.

 

[bilby]

Which is presumably why they used the political power gained by consolidating so much of the debt into one place to force the government to legally restructure the deal - to gain those additional rights.

What political power gained? What are you talking about?

Any restructuring deal is a settlement agreed upon _instead_ of fighting it out in court and letting the legal system have the final say. If you don't think the Puerto Rican government doesn't have their own army of lawyers to obtain the best deal they can in their own interests, you are quite naive indeed. It is a major ethical and criminal violation if any settlement the lswyers advise the gov't to agree to is not done in the best interests of Puerto Rico in accordance to that government's goals and desires.

OK, Now you are getting the objection people have here.

 

[Axulus]

What political power gained? What are you talking about?

Any restructuring deal is a settlement agreed upon _instead_ of fighting it out in court and letting the legal system have the final say. If you don't think the Puerto Rican government doesn't have their own army of lawyers to obtain the best deal they can in their own interests, you are quite naive indeed. It is a major ethical and criminal violation if any settlement the lswyers advise the gov't to agree to is not done in the best interests of Puerto Rico in accordance to that government's goals and desires.

OK, Now you are getting the objection people have here.

Why would anyone believe that the Puerto Rican government and their army of lawyers won't obtain the the best deal they can get given the law and the various rights it grants to the bondholders in this situation?

Or is it your position that the law itself is unethical and criminal?

 

[bilby]

OK, Now you are getting the objection people have here.

Why would anyone believe that the Puerto Rican government and their army of lawyers won't obtain the the best deal they can get given the law and the various rights it grants to the bondholders in this situation?

Are Puerto Rican lawyers, civil servants, and members of the government known for their absolute incorruptibility?

Is it impossible (or even implausible) that a cashed-up hedge fund might be able to bribe these people into agreeing to a deal that is not in the best interests of the people they represent? After all, they are defending other people's money, not their own.

Or is it your position that the law itself is unethical and criminal?

Not at all; But that doesn't mean that lawyers and government employees are certain to be neither unethical nor criminal, does it?

 

[Axulus]

Why would anyone believe that the Puerto Rican government and their army of lawyers won't obtain the the best deal they can get given the law and the various rights it grants to the bondholders in this situation?

Are Puerto Rican lawyers, civil servants, and members of the government known for their absolute incorruptibility?

Is it impossible (or even implausible) that a cashed-up hedge fund might be able to bribe these people into agreeing to a deal that is not in the best interests of the people they represent? After all, they are defending other people's money, not their own.

Sounds like an irrational fear to me. Do you have something concrete to provide some substance to the plausibility to such an allegation? Also, even if possible, what evidence do you have that such bribery and corruption will actually occur or is likely to occur in this particular instance? Isn't it a bit premature to start such allegations against these hedge funds _before_ such crimes have been committed? Do these particular hedge funds and their key players have a history of engaging in bribery and corruption of government officials?

Not at all; But that doesn't mean that lawyers and government employees are certain to be neither unethical nor criminal, does it?

I don't disagree that this can happen. The speculation and allegation, however, seems quite premature. If evidence begins to emerge about such crimes having been committed, I completely agree that those involved should pay dearly for what they have done. However, the mere purchase of debt for pennies on the dollar is no reason to begin making such allegations.