US judge allows freeze on Argentine assets, plaintiffs say

NEW YORK, Sept 16 (Reuters) - Two hedge funds seeking to freeze about $70 million of Argentine government assets said on Tuesday they have succeeded in convincing a New York court to hold the cash in a branch of the state-owned Banco de la Nacion.

However, U.S. District Court Judge Thomas Griesa is not making the latest filing public, marking the latest chapter in creditors' efforts to recoup the losses incurred when Argentina defaulted on its debt in 2002 following a fiscal crisis.

Attorneys for New York-based NML Capital Ltd, an affiliate of Elliott Management, said Judge Griesa last Friday granted the attachment of certain assets of the New York branch of the Argentina's state-owned bank, Banco de la Nacion.

The attachment order was also granted to another hedge fund, EM Ltd, owned by investor Kenneth Dart. Attorney's representing EM Ltd. could not be reached for comment.

Argentina defaulted on some $100 billion in sovereign debt at the height of an economic and political crisis, but about a quarter of its creditors, so-called "holdouts", rejected the deal.

In a statement, NML said it argued that the bank "is controlled so completely by the Government of the Republic of Argentina that it lacks a separate identity and functions as an alter ego of the Argentine state.

"As a result, its assets are subject to attachment in satisfaction of legal judgments against the Republic."

Officials at Banco de la Nacion and the Argentine Economy Ministry declined to comment on the ruling at this time.

In April, the judge temporarily blocked Argentina from transferring or selling debt held in a New York-based trust account.

Holders of Argentina's notes filed a class-action lawsuit in the U.S. District Court in Manhattan in 2004.

The bondholders said that they were never paid interest or principal on the 11 percent, global bonds, due Oct. 9, 2006, which are being held at the Depository Trust Co (DTC) in New York.

The bonds in question in this case were used as collateral for guaranteed loans, known as Prestamos Garantizados or PG's, prior to a debt default in late 2001.

Argentina avoids issuing bonds under international law, out of fear that its assets could be seized by these "holdout" creditors who did not enter a 2005 debt restructuring. (Reporting by Grant McCool and Daniel Bases in New York and Hilary Burke in Buenos Aires)