A NYT article on the possibility of a default by Argentina seriously misrepresented the issues involved and the origins of the term “vulture” in reference to the funds involved in a lawsuit against Argentina. The article implies that the funds had been bondholders at the time of Argentina’s default in 2001 who refused to accept the terms that were offered to bondholders following the default:
“Through two restructurings, the government eventually struck a deal with a majority of its bond investors, who are now called exchange bondholders because they exchanged their bonds for ones that were worth as little as a fourth of the value of the original securities. The hedge funds, known as the holdouts, declined to participate in the restructurings. Instead, they are seeking $1.5 billion in repayment, including interest.”
In fact, these funds bought up Argentine debt years after the default, paying a small fraction of its face value. Their intention was to use their political connections to get a favorable ruling from the courts, with the hope of being able to extract something close to the face value of the defaulted bonds from Argentina’s government. This is exactly what “vulture funds” do. The term did not originate with Argentina, it dates back decades.