Default prompts a Paul Singer sequel in credit default swap decision

Argentina’s former nemesis Paul Singer is standing judgment over the nation’s bond market once more.

Four years after cutting a deal with the hedge fund billionaire to end a lengthy legal dispute over its defaulted debt, the country can’t pay its debts again and Singer is back for a brief encore. His investment firm Elliott Management Corp is one of 14 companies that will decide whether credit-default swaps were triggered by last week’s failure to meet a payment deadline.

It’s far from the courtroom clash that captivated audiences from Manhattan to Buenos Aires. The contracts are between private parties, so Argentina isn’t on the hook. Still, the stakes are high: A potential payout of more than $1 billion to traders who hold the swaps. A CDS committee that includes Elliott will convene a meeting at 1pm New York time Wednesday with a vote likely in the next week. If approved, as expected, an auction might occur in mid-June.

Goldman Sachs Group Inc., JPMorgan Chase & Co., Pacific Investment Management Co. and Cyrus Capital Partners are also involved in the decision. It’s unclear who holds the majority of the swaps as that information is rarely public. Some investors buy them to hedge their bond exposure, while others scoop them up as a bet against a particular country’s debt.

Elliott was also on Argentina’s CDS panel in 2014. Buenos Aires Province Governor Axel Kicillof, who was economy minister at the time, said back then that he suspected Elliott held the swaps, which he criticised as leading to “the most wretched speculative capitalism.” The firm denied in a US court in 2013 that it owned the derivative contracts.