From an ethical standpoint I am always mystified by what goes on around the world and how perpetually greedy people are. It is insufferable really, I find it obvious and hope these are shared feelings with anyone who has an ounce of integrity that these distressed securities funds or vulture funds need to be stopped as they are blatantly taking advantage of the already weak countries. It is like salting a wound, investors gain enormous profits by purchasing debts on a secondary market for close to nothing, they then proceed to sue the debtor, after they default on their debt, for the debts full value plus outrageous interest. What happens when the country, already weak, cannot pay its bondholders or hold-outs? .
The case of Zambia and Donegal is a great way to show how this process works. In 1999, a vulture fund by the name of Donegal International purchased $15 million in worth of debt from Zambia (now, Dominican Republic of Congo) for $3.3 million, a mere fraction of its total worth. After Zambia's debt was canceled 6 years later they were saving $40 million annually. Once this occurred Donegal sued Zambia for the full amount plus interest totaling $55 million. A London court rejected the size of their claim but ordered $15 million be paid to Donegal from Zambia. At this time the country was literally almost the poorest in the world with something like only 25% of the population had access to clean water. The country can't even provide water to its inhabitants so to expect and demand them to pay $50 million dollars right after they declared bankruptcy can only be attributed to pure greed and selfishness. The way they are set up, meaning the ambiguity they are able to hide behind when forming these holdouts proves even further there is a sketchy line on which these investors are treading.
If I am being honest I would like to say that whomever conjured up the idea of vulture funds is a genius where finance and monetary profits are concerned.
