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.
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