Hedge funds seek out emerging markets

As the Covid-19 pandemic continues to strike countries around the world, hedge funds are preparing for a host of debt restructurings in emerging economies, writes Laurence Fletcher at the Financial Times.

Zambia’s struggle with its international creditors over debt payments is the latest sign of the stress to come. Last week, a group of 14 hedge fund and traditional bond investors indicated they would not support a proposal by the debt-laden country to suspend debt interest payments, unless it provided more clarity over its debts and came to the negotiating table. With a stake effectively big enough to block Zambia’s plans, the funds are set up for a lengthy fight.

Similar wrangles lie ahead. Debt deals in Ecuador and Argentina this year are likely to be the first among many, as the economic damage from coronavirus starts to expose countries that took on too much borrowing…