February 11, 2016 / 11:57 PM / 3 years ago

Argentina seeks to lift debt injunctions after settlement offer

NEW YORK (Reuters) - A U.S. judge on Thursday ordered creditors suing Argentina over defaulted bonds to establish why orders that restricted it from servicing its restructured debts should not be vacated after the country’s $6.5 billion offer to settle the dispute.

U.S.-court appointed mediator Daniel Pollack exits his midtown Manhattan office after a meeting on Argentina's debt crisis, in New York February 4, 2016. REUTERS/Brendan McDermid

U.S. District Judge Thomas Griesa in Manhattan gave bondholders until mid-February to show why the injunctions should not be lifted if Argentina repeals two local laws regarding its debts and pays any creditors who settle by Feb. 29.

The order, which Argentina requested, came after the South American country last Friday proposed a $6.5 billion payment to settle a legal battle stemming from its record $100 billion default in 2002.

In court papers, Argentina’s lawyers asked Griesa to vacate his injunctions to allow it to tap global capital markets to fund the settlements and to remove an incentive for the remaining suing bondholders to not settle on “reasonable terms.”

“The injunctions, which were necessary to bring about a resolution, are now an obstacle to finalizing those deals and similar settlements with debt holders,” Argentina’s lawyers wrote.

Elliott Management’s NML Capital Ltd and Aurelius Capital Management LP, among the leading creditors in the dispute, did not immediately respond to requests for comment.

Two out of six leading bondholders have already accepted the offer, court-appointed mediator Daniel Pollack said last week. The offer represents a 27.5 percent to 30 percent discount for creditors who filed claims of about $9 billion.

Those creditors spurned Argentina’s 2005 and 2010 debt restructurings, which resulted in 92 percent of its defaulted debt being swapped and investors being paid less than 30 cents on the dollar.

The proposed settlement came less than two months after President Mauricio Macri took office and expressed his commitment to a deal. He replaced President Cristina Kirchner Fernandez, whose administration called the holdouts “vultures.”

The settlement was conditioned on the approval of the Argentine Congress, where Macri lacks a majority, and the lifting of an injunction Griesa issued in 2012.

The order, which required Argentina to pay the holdouts $1.33 billion plus interest when it serviced its restructured debt, pushed the country into default again in July 2014 after Argentina refused to honor it and failed to settle the dispute.

Griesa, who has long overseen the litigation, in October extended similar relief to holders of several billions of dollars more in defaulted bonds.

Reporting by Nate Raymond; Additional reporting by Sarah Marsh in Buenos Aires; Editing by Lisa Shumaker

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