8/8/14 Argentina's Vulture, Paul Singer, Is Wall Street Freedom Fighter - Businessweek

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http://www.businessweek.com/articles/2014-08-07/argentinas-vulture-paul-singer-is-wall-street-freedom-fighter

Paul Singer Will Make Argentina Pay

By Max Abelson and Katia Porzecanski August 07, 2014

Illustration by Kelsey Dake

After Argentinas July win in the semifinals of the World Cup, fans jumped for joy across the country and
climbed wobbly stoplights to belt out patriotic songs. On the streets of at least one city, Rosario, Argentinas
third-largest, they also took the opportunity to taunt a U.S. hedge fund manager. Dancing around the National
Flag Memorial, they sang a song in Spanish that more or less followed the tune of Bonnie Tylers Its a
Heartache. F
ing vulture funds, they chanted, in rough translation, stop messing around and agree to a
swap.

They would not be satisfied, in soccer or in finance. Weeks after the Argentine team was shut out in the World
Cup final, talks in Manhattan broke down between Argentina and some of its creditors, the most important a
group of hedge funds led by billionaire Paul Singer. On July 30, when a last-ditch workaround failed and the
deadline for interest payments of $539 million passed, Argentina went into default for the second time in 13
years.

How does a New Yorker help tip over the second-largest economy in South America a few weeks before his
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70th birthday? By being stubborn, self-righteous, clever, and willing to take his decade-long fight against the
country to a Las Vegas court, a Ghanaian seaport, weapons warehouses in Maryland, and at least two rocket
launches.

Most bondholders from the last Argentine crisis, in 2001, agreed to accept about a third of what they were
owed and move on when the country renegotiated its debt and traded new bonds for the old ones. Singer,
whose Elliott Management oversees $24.8 billion, wanted more. He went all the way to the U.S. Supreme Court
to make sure bondholders who compromised cant get paid until he does, and his victory there in June meant the
country would default unless it surrendered to him. Argentina said its hands were tied, and it simply couldnt
sweeten Singers deal. It defaulted.

For a debt negotiation, the July meetings were almost cinematic. On the other side of the table, facing the hedge
funds, was Argentinas economy minister, Axel Kicillof, known for his pointy sideburns and scholarship on
Marxism, who was born two years after Singer graduated from Harvard Law School in 1969. Kicillof, whom
BuzzFeed called gorgeous this year, explained in a press conference after the talks failed that he wouldnt be
extorted into a deal with a vulture. Other officials have called Singers fund scum.

Singer, according to interviews with his colleagues, characterizes the case as a fight against charlatans who refuse
to play by the markets rules. Hes owed, he has the right to be paid, and for that hes the bad guy? He can
hardly believe it. When he sees an opportunity, hell seize it, says Ralph DellaCamera, who worked for Singer
from 1986 to 1999, becoming his head trader. I love it when he wins, because it just validates who he is as a
person. Hes a fighter. Hes not going to give up. And hes not a villain: Hes a hard-nosed businessman, thats
it, and he sticks up for what he thinks is right. More people should do that.

The court-appointed mediator, Daniel Pollack, said default is a real and painful event that hurts real citizens. This
one hurts for a second reason: Argentina could afford the interest payments to other bondholders, and it has tried
to pay. But the $539 million just cant get delivered. When it issued the debt that Singer holds, it agreed to
submit itself to U.S. law. No one gets paid until Singer and the other holdouts receive the $1.5 billion they want.

An earlier success may have emboldened Singer. He spent about $11 million on government-backed Peruvian
bank debt in 1996, and Peru agreed in 2000 to pay him $58 million. That meant he got better than a 400 percent
return. All it took was trips to court in the U.S., U.K., Luxembourg, Belgium, Germany, and Canada.

He finds a country in distress, he buys its debt, he demands full payment, and he doesnt care about the
economics, the poverty, the circumstances of the country, says Mark Cymrot, who represented Peru and is
head of BakerHostetlers international disputes group. From his point of view, he would say, Whats wrong
with it? And youd have to say hes right. But I wouldnt want to earn money that way myself.

Singer has gone after Argentine warehouses and space contractsin 2012 he took a naval vessel

Singer began buying bonds before Argentinas record $95 billion default in 2001. A string of five presidents in
two weeks, an historic recession, and violence that killed at least 27 people didnt turn him off. He kept buying
defaulted debt at a deep discount. When most of Argentinas creditors accepted strict offers in 2005 and 2010
to swap their bonds for about 30 on the dollar, Singer wasnt among them. Instead, he won court claims to at
least $1.7 billion from the country and embarked on a global quest to collect.

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The voyage has been action-packed, though with a lot of legal consultants and arcane applications of little-
known legal terms. In 2004, NML Capital, a Singer subsidiary based in the Cayman Islands, persuaded a judge
to bar Argentina from selling four military warehouses it owned off a parkway in Maryland, freezing $3 million in
buildings, motors, weapons, and a plane, according to an Argentine defense ministry spokesman. A lawyer for
NML modestly said at the time that the order covered only real estate.

Singer managed to briefly seize an Argentine naval vessel in Ghana in 2012. After the three-mast training frigate
was evacuated, the International Tribunal for the Law of the Sea ordered it freed. The frigate sailed off. President
Cristina Fernndez de Kirchner told her country that the vulture funds could try to take their boat, which happens
to be named the ARA Libertad, but they wouldnt touch Argentinas freedom, sovereignty, or dignity.

Other creditors followed Singers example. In 2013, Fernndez spent $880,000 to rent a jet after another group
tried to ground Tango 01, the Argentine version of Air Force One, during a maintenance trip to the U.S. Even
book fairs werent safe. The Wall Street Journal reported that Argentinas National Museum of Fine Arts
would keep artworks out of the 2010 Frankfurt Book Fair to stop creditors from snatching them.

This year, Singer tried to track down government funds allegedly funneled out of Argentina and into Nevada by
an Argentine businessman accused of embezzling $65 million. He sued fellow billionaire Elon Musks Space
Exploration Technologies, known as SpaceX, hoping to take over the rights to two satellite-launch contracts
Argentina had bought, valued at $56.5 million each. (SpaceX filed a motion to dismiss the suit.)

Argentina is in a difficult position. Until it pays Elliott Management and the other hedge funds, which include
former Elliott employee Mark Brodskys Aurelius Capital Management, it essentially will remain isolated from
international capital markets. Unable to borrow abroad cheaply since the last default, the country has seen its
foreign reserves hover near an eight-year low. Its said it cant boost its offer to Singer and his peers because the
nation would be legally bound to do the same for the 93 percent of investors who agreed to the earlier
compromises. It cant afford that. Kicillof has said Singer still would make a 300 percent return if he agreed to
accept the deal others took.

DellaCamera, Singers former head trader, recalls his boss hamming it up at parties by playing pianofavoring
standards, classical, and New Orleans R&B by the Neville Brothersbut he remembers still more about their
weekly portfolio reviews. Wed go through every single position we had, religiously, he says. Theyd do it at
the office or Singers home, where his cook would prepare dinner for colleagues. He didnt want surprises. And
when he felt there was a surprise, he would get upset, DellaCamera says. Youre into position five, two hours
into this meeting, and youre tired a little bit, and its going well, hes not yelling at you, so youre feeling good.
And you get to the position, and lets say its an investment in a gold mine in Peru or whatever the hell it is.
Singer might stop and remember a detail about mine work that was supposed to have begun. This is an
insignificant mine, and youre trying to tell him that, but you dont want to tell him that. Once you know youre
digging yourself in a hole, he just pounces on you. Oh, God. And thats when he gets angry. Because in his mind,
its all about the basics, DellaCamera says. He wouldnt throw things, but he would yell. How could you miss
this? He would make you feel very uncomfortable.

Singer wouldnt comment for this story. When he gave Bloomberg News an interview in 2008, he wouldnt say
where exactly in the New York metropolitan area he was raised. After law school he spent four years at
corporate law firms in New York and three as an attorney in Donaldson, Lufkin & Jenrettes real estate unit. He

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left to start ElliottElliott is his middle namewith $1.3 million from family and friends. His oldest fund has
delivered compounded annual returns of about 14 percent.

The photo of Singer accompanying that article, more than 30 years after he launched his company, was the first
hed ever agreed to sit for. Its difficult to find photos of him smiling. In two pictures online where he appears to
be giving a half-grin, his lips are actually turned down. His chroniclers have had a hard time describing him: With
his trim white beard, wire-rimmed spectacles, and erudite demeanor, Singer could pass for a college professor,
one profile declared. With his trimmed white beard and rounded metal spectacles, Paul Singer might come
across as a slightly miffed professor, a newspaper said. With his trimmed white beard and rounded glasses, the
69-year-old could pass for a professor, another said. One writer has compared him to the minimalist composer
John Adams. If you squint, Singer looks like a bald Wolf Blitzer delivering bad newsbut with pinker cheeks
and before the anchor got his thick black hipster glasses.

In letters to his investors, Singer has cast a wide net of disapproval. Resentment is not morally superior to
earning money, he explained about rising anger at the 1 Percent. The Federal Reserve, he wrote elsewhere, is
a group of inbred academics who have lost any semblance, any wispy remnant of humility. The U.S. and
Europe are headed for mass poverty and degradation of freedom. Regulators are quite sure to embarrass
themselves again soon. The government confiscating property is not out of the realm of possibility. Society
itself might be undermined, he wrote this year, by a nation disdaining the rule of law and paying whatever it
wants to pay.

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A person who worked on Argentina at Elliott says the firm thinks the country has abandoned the markets
guidelines, turning a debt into an anti-American political ploy and playing a game of brinkmanship. The person,
who asked for anonymity because of Singers penchant for privacy, says Elliott sees the saga as a fight between
mercy and justice, with the Argentines begging for amnesty and Singer wanting to uphold his lawful rights. He
adds that the hedge fund thought one of its people was possibly being followed by an Argentine agent or lawyer.

A current colleague, who also would only speak about the case anonymously, says its simply an issue of free
markets. Singer believes contracts must be respected and laws enforced, the colleague says, and has the
resources to try to see that they are. He has dug in deep, and he wants to win.

My guess is, he thought Argentina would never allow the technical default to happen, it would be too debilitating
for the entire country, says hedge fund manager J. Kyle Bass, whose Dallas-based Hayman Capital
Management bought Argentine bonds last year. The bottom line is, hes a tremendous distressed investor. And

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hes a profiteer at other peoples expense.

David Skeel, who studies bankruptcy at the University of Pennsylvania Law School, says a fair amount of
Singers activities with developing-country debt have been immoraltrolling for claims and then pushing them to
the hiltbut its hard to feel too sorry for Argentina. Skeel says the Argentines are periodically coercive,
stubborn, and biased. Harvard Business Schools Noel Maurer reverses that. He supports some of the funds
previous battlesespecially against the Republic of the Congobut sides with Argentina this time, saying Singer
has picked the wrong battle, if youre on a moral mission.

All battles eventually end. This one has many different options for its grand finale, including an outsider saving the
day by taking the debt off Singers hands. JPMorgan Chase (JPM) has been part of a group of big banks
holding talks with Elliott, a person with knowledge of the discussions says. If the hedge funds own talks with
Argentina progress, they could ask a U.S. judge to delay implementation of the ruling that blocks the country
from paying others, allowing that $539 million interest payment to go through. The bondholders who have
already compromised could waive the clause that keeps Argentina from offering holdouts a better deal. Or
maybe everyone will sit tight until next year when that clause expires, and room for negotiation expands.

In a recent letter, Singer professed astonishment that the saga has attracted so much attention. When the
Argentine rulings and judgments are cobbled together, the whole thing adds up to about a tenth of Elliott
Managements $24.8 billion. He has larger concerns on his mind. An electromagnetic pulse that could massively
disrupt the grid is one risk that is head-and-shoulders above all the rest, a recent letter to investors warned. He
appears to have a vision of himself as not only a toppler of nations, but also a master of the universe in the most
cosmic sense: Citing a solar disturbance two years before the American Civil War, named the Carrington Event,
he called for a bipartisan push to make the country (and the world) safer from the perils of the solar system.

Bipartisanship wasnt in the air at a May dinner in Midtown when Singer delivered a speech at the annual gala for
the Manhattan Institute for Policy Research, a think tank that promotes economic choice and individual
responsibility. Singer is chairman of a board that includes fellow hedge fund billionaire Daniel Loeb and Elliott
colleague Jay Newman, who helps oversee the Argentina investment. Standing in a ballroom originally built as a
bank, Singer complained about the rhetoric surrounding the issue of income inequality becoming increasingly
demagogic. In the audience were two of the evenings honorees, Paul Ryan and Jeb Bush, both potential 2016
Republican presidential candidates.

Singer has given at least $1 million each to the Republican Governors Association, a political action committee
for Mitt Romney, and another PAC affiliated with strategist Karl Rove. Among his larger concerns are intrusions
on freedom. Even one group that looks like a glaring exception to his tuxedoed conservatism, American Unity,
his PAC advocating for gay rights, supports pro-freedom Republicans. It aims to spread freedom for all
Americans, including his son, a doctor. The two appeared on a panel this year featuring finance executives and
their openly gay sons.

The Manhattan Institute, noted Singer, is home for those who have the courage to say what is right and stick
with their views, no matter how intense the pressure to conform to a comforting-yet-false consensus. He
promised its members will do what we can to preserveto preventNew York City from becoming, say,
New Havana.

His earlier Institute talks were also short, sharp, and infused with animus toward the federal government.
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Individual liberty, the basic underpinning of American society, requires constant defense against the
encroachment of the state, he said at a November 2011 talk, quoting Citibanks late chief executive officer,
Walter Wriston. At the time, Occupy Wall Street protesters were still camped downtown in Zuccotti Park.
Singer, standing in black tie in front of a gold-tasseled curtain, called them aging hippies, anticapitalists, and anti-
Semites, and people desperately in need of potty training. The crowd clapped, but he didnt smile.

Maybe he smiles inside. There are signs now and then that he might enjoy a kind of humor. At this years World
Cup, according to a colleague, as the Argentine national team made its glorious push and its country teetered
toward default, Singer was there, in the stadium. He was wearing an Argentina jersey.

With Pablo Gonzalez and Kelly Bit

Abelson is a reporter for Bloomberg News in New York.
Porzecanski is a reporter for Bloomberg News in New York.

2014 Bloomberg L.P. All Rights Reserved. Made in NYC

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