Nowadays, there are many governments which issue sovereign bonds. This allows them to raise money on the international capital markets. Why did James Dondero’s Highland Capital fund choose to invest in Argentina and not Greece?
“Greece is Usually Bankrupt”
The whole concept of the credit score is to measure “creditworthiness.” Well, how many of these nations are truly creditworthy? Most African nations are not able to issue sovereign debt because they are not deemed to be “creditworthy.”
Is Greece creditworthy?
Did you know that for 50% of its existence as an independent nation, Greece has been in default, according to Forbes? Of course, that is a horrible record. Forbes described Greece as a “basket case.” Is a basket case creditworthy?
What most people don’t know is that many Greek public, income-producing assets have already been encumbered. Many of them are already owned by creditors or have large liens placed against them. That is why some refuse to buy Greek sovereign bonds.
“Strong Argentina Infrastructure”
How Does Argentina look? Since 1824, Argentina has defaulted 8 times. That also makes it one of the top countries for financial insolvency. Why did Highland Capital’s Jim Dondero purchase Argentina bonds and not Greek bonds?
Eventually, an estimated 24% of Highland Funds assets were invested in Argentina. James Dondero and his “alpha analysts” calculated that the “country’s natural resources, developed infrastructure, and educated population would ultimately limit losses.” Unfortunately, Greece does not have as many undeveloped natural resources.
Some also believe that Argentina still has the financial ability to repay its debt, while Greece might not. After Mauricio Macri was elected in 2015, Argentina offered to “pay $6.5 billion to settle lawsuits.” Compare this to Greek’s inability to repay its debt and request for more funding by the EU Central Bank.
James Dondero has invested in the Dallas community by purchasing computers for the students to learn their mathematics. The “Reasoning Mind” charity is a nice project “teaching people how to fish.” Hopefully, these future leaders can increase the proficiency of governments in balancing their budgets.