Another Showdown Between a Hedge Fund and a South American Country Looms

New York (HedgeCo.net) – U.S.-based hedge fund Gramercy is threatening legal action against the South American country of Peru over $5.1 billion in defaulted bonds, but Peru doesn’t seem all that worried. Gramercy bought the bonds seven years ago at a very steep discount.Peruvian officials have stated that any restructuring and any legal proceedings will be carried out under Peruvian law and not anywhere else. Peru has introduced a partial repayment schedule on the bonds in question, but Gramercy wants more.

Argentina has been going through a similar situation with hedge funds that purchased the country’s sovereign debt. A New York court ruled last year that Argentina could not make payments on new debt without a payment plan on its old debt. Argentina has refused to accept the New York Court’s ruling.

Gramercy may have to deal with more than just the Peruvian government in dealing with this situation. Activist groups are questioning the practice of buying up the bad debt of developing nations and the so-called “vulture funds.”

Rick Pendergraft
Research Analyst
HedgeCoVest

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