Argentina, like a lot of countries, keeps a few old-line sailing vessels in its navy. They use them to train sailors and show the flag. They don’t fight, they don’t get involved in disputes. So imagine how surprised 200 sailors must be to find themselves trapped in Ghana, their ship being held as if war had just been declared!
The ARA Libertad pulled into Tema, Ghana, on graduation tour down the West African coast. A hedge fund with a legal claim on Argentina had been monitoring its movement. The ship docked to find a bailiff from the Superior Court of Judicature waiting there with a court order to hold the vessel. “The Accused (the Foreign Ministry of Argentina), its officials, agents ... including the captain of the Ship, Pablo Lucio Salonica, and the crew are prohibited from moving the frigate ARA Libertad from Puerto Tema without a new order from this court.” The crew then had to surrender to the court. Argentina can release the ship by paying a bond: the local press has mentioned $10 million; technically, the bond will have to be equal to the value of the ship.
Elliott Capital is chasing money it claims Argentina owes it. Argentina defaulted on its debts back in 2002, and then essentially repudiated most of it. Most creditors accepted the deal, but Elliott did not. (More accurately, Elliott bought Argentine debt on the secondary market after the default but before the repudiation.) Elliott owns bonds with a face value of $630 million; including past-due interest, they are now worth $2.3 billion. (That is a lot of interest!) Elliott has done relatively well in New York courts, getting judgments worth about $1.6 billion. That is what the Ghanaian seizure is about.
The thing is, the New York courts have been pretty strict about what the creditors can actually seize. They have ruled out going after Aerolineas Argentinas, stating that it is in receivership and not really a state entity. Ditto for state funds held in New York. On the other hand, the court only just declared in favor of the bondholders in these two orders here and here, which changes things from the days when creditors were just looking around for assets without a legal decision in their favor.
Anyway, I predict that the Argentine ship is released: it is a naval vessel, protected by sovereign immunity. But I also predict that Argentina is going to find itself in a gigantic heap of trouble, particularly as the economic situation continues to deteriorate. It will be basically locked out of foreign markets, although it might be able to raise dollar funds at home. (Maybe. And at high cost.)
Any interest in a post on the state of Argentina?