Financial Vultures

vulture on a sign

In 1979, Romania loaned Zambia $15 million to put toward agricultural machinery and vehicles. By the 1990s due to widespread poverty and devastating health conditions, Zambia was unable to repay its external debt and started to negotiate for debt cancellation.

During this negotiation, in 1999, a company named Donegal International bought up Zambia’s debt, then valued at $30 million, for $3.3 million. Donegal then sued Zambia for the full amount of the debt, plus interest – a total of $55 million.

Donegal has been called a “vulture fund,” which designates a company that buys up “bad” debt at a discount and then sues for the full amount plus interest. These funds carry out most of their activities through legal action in national courts and usually win.

Donegal International was started in 1997 with the sole purpose of holding and managing the debt purchased by Romania and owned by Zambia. Companies like Donegal International are often set up to pursue a single debt and then are shut down as soon as they win their lawsuit. This technique allows them to be as secretive about their actions as possible, often going unnoticed due to their lack of publicity.

Donegal International’s director is Michael Sheehan, a partner in Debt Advisory International (DAI). DAI is a Washington D.C-based limited liability company that provides debt related advisory services to private and sovereign creditors and debtors. When intercepted by a BBC Newsnight TV crew outside his home in 2007, Sheehan refused to answer any questions about the lawsuit his company had filed against Zambia. “No comment,” he said. “I’m in litigation. It’s not my debt.”

In 2007, the Zambian case was settled at London’s High Court. Donegal International was awarded $15.5 million, which was lower than the $55 million demanded by the fund, but still brought substantial profit to the firm.
Little information is available about the Donegal International operation. Its website contains limited information about the people behind the process, and the only means of contact provided is a single email address. Several documents are linked to the website to justify or “put into perspective” the Zambian debt crisis, blaming Zambia’s slow response to carrying out transactions for the case against them.

Michael Sheehan is one actor behind the funds, but it was Paul Singer, the reclusive billionaire, that really invented vulture funds. Singer is the founder of the hedge fund Elliot Associates, a convertible arbitrage trader that moved into investing in distressed debt. In 1996, Singer’s company paid $11 million for discounted Peruvian debt and threatened to bankrupt the country unless they paid $58 million. The court awarded Singer the full amount. Singer then pursued a $400 million case against Congo-Brazzaville.

Both Singer and Sheehan are major contributors to the US Republican party. Singer contributed millions toward George W. Bush’s campaigns in 2000 and 2004 and was a major financial backer of Rudy Guiliani’s presidential bid.
Despite criticism of vulture funds, some financial journals have come to their defense, blaming the corruption of the leadership of the countries under attack for the money lost to vulture funds.

In an article published at, Joshua Hammer said that “it is hard to see how Zambia’s increased financial burden is going to make things worse for the average Zambian.” He claims that the $15 million won by Donegal International in its lawsuit against Zambia would “hardly make a difference” since in 2006 Zambia’s president Levy Mwanawasa leased a helicopter for more than half that amount. As of 2007, the external debt of Zambia represented more than 16% of its GDP. Taking into account the losses incurred by corrupt government officials, the country cannot afford to lose anymore.

The Jubilee Debt Campaign’s effort to Stop Vulture Funds:
Donegal International: