Argentina seeks U.S. court stay to avoid new debt crisis

Mon Jun 23, 2014 6:27pm EDT
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By Hugh Bronstein

BUENOS AIRES (Reuters) - Argentina asked a U.S. judge on Monday to issue a stay of his ruling against the country in its case against "holdout" creditors, as it sought to avoid a new default that would further punish an economy already slipping into recession.

The move is the latest twist in a 12-year-old battle with investors who refused to take part in bond restructurings after Argentina failed to pay about $100 billion of debt in 2002.

Without a stay on a ruling by U.S. District Judge Thomas Griesa, Argentina would be legally barred from making a June 30 coupon payment on its restructured bonds unless it pays $1.33 billion to holdouts seeking full payment of the debt they hold.

"We consider it essential that Judge Griesa issue a stay so that the republic of Argentina can continue paying the holders of restructured bonds," Economy Minister Axel Kicillof told reporters in Buenos Aires.

Lawyers for the ministry asked Griesa for the stay to "allow the Republic to engage in a dialogue with the plaintiffs in a reasonable time frame for these kinds of negotiations."

If the government does not make the June 30 payment, it has a 30-day grace period before falling into technical default.

A framework for talks between the holdouts and Argentina started taking shape when Griesa appointed New York financial trial lawyer Daniel Pollack as a special master to assist in the negotiations. Pollack told Reuters he plans on "moving as quickly‎ as possible given the time constraints."

The government also announced on Monday that the economy contracted in the first quarter after shrinking in the last three months of last year. The shrinkage was expected and local financial asset prices rose on Monday thanks to President Cristina Fernandez's reversal of her policy of not negotiating with holdouts.   Continued...

The Economy Ministry building is seen in Buenos Aires June 18, 2014.  REUTERS/Enrique Marcarian