Putting Thought Into Action

Feb 1, 2004

Adam Lerrick is an academic who has cooked up ingenious solutions to financial problems and tested the ideas in real life - such as devising a way to unify Argentina's bondholders to defend their rights.

In Buenos Aires, government officials accuse Adam Lerrick of exploiting guileless European bondholders with his plan to negotiate on their behalf. Like it or not, Lerrick will probably play an important role in debt talks, once they start. His Argentine Bond Restructuring Agency (Abra), the vehicle he set up to hold Argentine defaulted debt, holds more than $1 billion in bonds.

Lerrick claims Abra gives individual investors a voice at the negotiating table rather than being elbowed aside by bigger, more sophisticated professional investors.

"Abra was launched last May and in eight weeks became Argentina's largest foreign private creditor," he says. When Argentina's debt is finally restructured, Lerrick and his team stand to earn a success fee equal to 20% of the increase in value of Abra's bonds compared to the US dollar global bonds held by large institutional investors.

Abra cleverly addresses the "coordination problem" of providing individual bondholders...

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