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Hedge fund Gramercy threatens to sue Peru on defaulted bonds

Staff writer |
A US hedge fund has threatened to sue Peru over bonds issued by the country's former military regime.

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Connecticut-based hedge fund Gramercy purchased the defaulted debt at a discount in 2008 after other bondholders failed to reach a deal.

Peru's finance minister said the government would oppose any legal action outside its borders. Purchasing defaulted bonds on the cheap to make a profit in a settlement is a common hedge fund tactic.

Peru defaulted on the $5.1bn in bonds in the 1980s. Gramercy has threatened to bring a claim against Peru under a tribunal system established in a US-Peruvian trade deal.

This type of action has been called “predatory” by groups in favor of sovereign debt relief plans.

Last week Peru played host to meetings of the World Bank and International Monetary Fund (IMF). Among the topics discussed was how to help country's restructure debt after a default to avoid drawn-out court battle.


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