Meet the man behind Argentina’s default

 

Paul Elliot Singer is a true geoentrepreneur of our time.

He became well known due to his involvement in Argentina’s recent default. Meet the man who challenges sovereign states through their sovereign debts!

Paul Elliott Singer, born August 22, 1944, is the American founder and CEO of hedge fund Elliott Management Corporation, an activist investor and a prominent philanthropist.

Through Elliott Management, Singer also became well known as an early speculator in distressed securities, winning cases against Peru, the Congo, and later, Argentina, for repayment of the full face value of debts acquired at a deep discount during the countries’ respective financial crises.

Singer obtained his B.S. in psychology from the University of Rochester and a J.D. from Harvard Law School. In 1974, he accepted a job as an attorney in the real estate division of the investment bank Donaldson, Lufkin & Jenrette.

In 1977, he founded the hedge fund Elliott Associates L.P. with $1.3 million from various friends and family members. Today, Elliott Management Corporation oversees Elliott Associates and Elliott International Limited, which together have more than $21 billion in assets under management. Their principal investment strategy is buying distressed debt cheaply and selling it at a profit or suing for full payment.

A 2012 CNN profile of Singer noted that losses sustained early in his career led to a “risk aversion that still guides his investing today. For example, he rarely uses leverage to juice returns.” Thanks to his caution, “Elliott has had only two down years” since 1977, rising “4.2% in 2011, a year in which most hedge funds lost money.” According to CNN, Singer focused from early times “on distressed assets,” buying up bankrupt firms’ debt and acquiring “a reputation for strong-arming his way to profit.” Elliott has been involved “in most of the big post-crash restructurings, including Chrysler and auto parts supplier Delphi.” Over Elliott’s history, it has averaged 14 percent annual returns, compared with 10.8% for the S&P500 stock index as a whole.

Purchasing sovereign debts

In 1996, Elliott bought defaulted Peruvian debt for a reported $11.4 million. In 1998, a U.S. court ruled that one could not buy debt with the sole purpose of suing the debtor. Elliott won a $58 million judgment when the ruling was overturned in 2000.

After Argentina defaulted on its debt in 2002, NML Capital Limited, a Cayman Islands-based offshore unit of Paul Singer’s Elliott Management Corporation refused to accept its offer to pay less than 30 cents per dollar of debt. These are bonds with a face value of $630 million, for which NML reportedly bought for $48 million, but that Elliott assessed were then worth $2.3 billion with accrued interest.

In early October 2012, NML arranged for the seizure of an Argentinean naval vessel in Ghana, in an effort to force Argentina to pay its debt. Argentina, however, refused to pay the debt, and shortly thereafter regained control of the ship and removed it from Ghanaian waters.

In a November 2012 piece in the Huffington Post, Argentina’s Foreign Affairs Minister, Héctor Timerman, harshly criticized Singer for attempting to collect on the debt. Calling Singer “the inventor of vulture funds,” Timerman argued that the $127 million Singer had received from the Republic of Congo to settle a $400 million debt he had acquired for $10 million “should be going to build roads, schools and other poverty reduction programs.”

In his investor letter for the fourth quarter of 2012, Singer described Argentina’s response to the court’s ruling as “defiant and acrimonious,” saying that its dismissal of the ruling as “judicial colonialism” was “puzzling,” given that Argentina had chosen “to submit itself to the jurisdiction of New York courts and to waive its sovereign immunity.”

In February 2013, the U.S. appeals court heard Argentina’s appeal in the NML case. In March 2013, Argentina offered a new plan that was judged unlikely to be acceptable to the New York court. On August 23, 2013 the U.S. Court of Appeals for the Second Circuit affirmed the lower court’s verdict and dismissed said plan. In June 2014, the U.S. Supreme Court rejected Argentina’s appeal of the ruling.

Philanthropy and Social Activism

Paul Singer founded the Paul E. Singer Family Foundation, which supports many charitable projects including the Harvard Graduate School of Education Singer Prize for Excellence in Secondary Teaching, VH1 Save The Music Foundation, the Food Bank For New York City, National Gay and Lesbian Task Force Action Fund, the New York City Police Foundation and MarineParents.com.

Singer also signed The Giving Pledge, a commitment by wealthy individuals and families to donate more than half of their wealth to address society’s “most difficult moral and economic challenges.” In his commitment letter, he stated, “The Giving Pledge uniquely combines the direct provision of resources with the power of an idea – the idea that fostering discussions about the purpose of philanthropy may improve our philosophies of giving and lead to better results for those in need.”

Singer has also contributed to gay-rights causes and same-sex marriage campaigns, and has also actively sought to persuade other conservatives to support gay marriage. In 2012, Singer provided $1 million to start a PAC named American Unity PAC. According to the New York Times, the PAC’s “sole mission will be to encourage Republican candidates to support same-sex marriage, in part by helping them to feel financially shielded from any blowback from well-funded groups that oppose it.” Singer spent more than $10 million, since 2010, to help push Republicans and states to support and legalize gay marriage.

Singer sponsors the University of Rochester Singer Prize for Excellence in Secondary Teaching, the Harlem Children’s Zone, the Success Charter Network, and the Police Athletic League NYC.

Singer has given over $14 million to a variety of military causes, including the Bob Woodruff Foundation, the Semper Fi Fund, the Special Operations Warrior Foundation, Spirit of America, the Navy Seal Foundation, The Mission Continues, and the Children of Fallen Patriots Foundation.

Singer is Chairman of the Board of Trustees for the Manhattan Institute for Policy Research. He also serves on the Board of Fellows of Harvard Medical School and the Board of Directors of Commentary Magazine.

Singer is a member of the Committee on Capital Markets Regulation.

Singer is an active participant in Republican Party politics. He has said that he hopes to elect officials who will oppose government regulation of finance, and he was a major contributor to George W. Bush’s presidential campaigns.

In 2007, Singer led a financial industry fund-raising effort for Rudolph Giuliani, first as regional finance chair and later as senior policy adviser. That same year, Singer provided $175,000 to support a petition drive for a proposed California initiative to apportion the state’s 55 electoral votes by congressional district. At least 19 of the state’s 53 congressional districts were expected to vote for a GOP presidential candidate, enough to change the national results in a close election.

Views and Writings

Singer has written columns in the Wall Street Journal. In 2009, he wrote a piece titled, “Free-Marketeers Should Welcome Some Regulation,” in which he argued that, “It’s true that monetary policy was too lax for too long, and the government encouraged lending to people who were unlikely to repay their loans. But this crisis was primarily caused by managements and individuals throughout the financial system who exercised extremely poor judgment. The private sector, not the public sector, is where the biggest mistakes were made.”

At a September 2006 financial conference in New York City, Singer delivered a speech called “Complexity Made Simple,” advising that the purchase of collateralized debt obligations (CDOs) was a serious mistake, anticipating the downturn of the housing market by nearly a year before the $770 billion taxpayer-funded bailout.

Fellow hedge fund manager Jim Chanos revealed in an August 2009 radio interview that he and Singer had met with G7 finance ministers in 2007 to warn them that the global financial system was increasingly unstable and approaching a catastrophe, with banks on the verge of sinking the global economy. They argued that decisive action was called for, but were met with indifference.

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