More than 130 developing countries have called on the UN to stop so-called vulture funds undermining debt restructuring deals like those at the centre of
The Latin American country slipped into default in July after losing a long legal battle with hedge funds that bought its debt at rock-bottom prices during
Debt campaigners welcomed the proposal, which is likely to be voted on at the UN general assembly next week. They said if successful it could solve the gridlock over
In the longer term, the submission aims to find more efficient ways of dealing with debt crises and reduce the likelihood of them happening in the first place. But there are concerns the
"The danger is that rich countries such as the
The hedge funds battling to get repayment on Argentinian bonds have been branded vulture funds by the country's government and anti-poverty campaigners after buying the country's debt during the crisis of 2001-2.
Most of the country's bondholders agreed to take a big reduction in the value of their original investment – known as a haircut – but the hedge funds have insisted on full repayment. A US judge backed the funds, known as holdouts, and has ordered that talks to hammer out a settlement must continue.
There have been concerns among developing nations and campaigners that a victory for the vulture funds will encourage creditors that have been forced to take a haircut to sue, and will make future debt restructurings more difficult to organise.
But support for new rules has been picking up, and last week a group representing banks and investors agreed to change the way they deal with defaulting government debt, removing the right of veto from holdouts.
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