Vulture fund

Vulture fund
From Wikipedia, the free encyclopedia
http://en.wikipedia.org/wiki/Vulture_fund

A vulture fund is a financial organization that specializes in buying securities in distressed environments, such as high-yield bonds in or near default, or equities that are in or near bankruptcy.

As the name suggests, these funds are metaphorically like circling vultures patiently waiting to pick over the remains of a rapidly weakening debtor.

Vulture funds target not only companies but also whole countries. In the recent case of Argentina, for example, vulture funds bought up a large part of the public debt at very low prices (sometimes only 20% of their nominal value), and then attempted to cash them when the Argentine economic crisis exploded in 2002. A single vulture fund run by Kenneth B. Dart, heir to the Dart Container fortune, claimed 700 million USD in a lawsuit against the government of Argentina.

A company registered in the British Virgin Isles been given permission by a British court to enforce a claim for tens of millions of dollars theoretically owed by Zambia. The high court ruled that a claim against Zambia by the US company Donegal International, owned by US citizen Michael Sheehan, for debts incurred by the impoverished southern African nation more than a decade ago, was lawful. Donegal bought the Zambian debt, with a face value of around $40m, from Romania in 1999, for less than $4m. Zambia had run up the debt, mainly for agricultural machinery, during the Cold War.

Vulture funds have sometimes sued national governments with success, in order to freeze their assets. International courts have at times prevented countries from paying to other debtors because one of these funds had requested an embargo.

A related term is "vulture investing", where certain stocks in near bankrupt companies are purchased upon anticipation of asset divestiture or successful reorganization. A prime example in the U.S. is K-Mart, where the real estate held by the company was the anticipated payout for investors who bought stock during their bankruptcy proceedings.

http://en.wikipedia.org/wiki/Vulture_fund

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HOUR TWO GUEST: Greg Palast will join Randi to discuss Vulture Funds and how individuals figured out a way to get their hands on funds that our government gives to poverty stricken countries – and puts it in their own pockets! One of the “Vultures” is Rudy Guiliani!

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