UPDATE 2-U.S. judge rules against Argentina in debt case
* Bank funds were frozen in 2006 pending ruling
* Judge rules Argentine Central Bank not independent
* Attachment hits bond prices, risk spreads (Adds bonds fall, country risk, details and byline)
By Fiona Ortiz
BUENOS AIRES, April 7 (Reuters) - Some $100 million in Argentine Central Bank deposits in New York can be seized to pay two investment funds that sued Argentina over unpaid debt, a U.S. federal judge ruled on Wednesday.
The Argentine funds held in the U.S. Federal Reserve Bank in New York have been frozen since 2006, but another judge delayed their attachment pending an investigation into whether the Central Bank could be considered part of the Argentine state.
Judge Thomas Griesa of the United States District Court of the Southern District of New York on Wednesday ruled that funds of the Central Bank, also called the BCRA, are really those of the Republic of Argentina saying evidence shows that the bank is not autonomous.
"The court ... concludes that the $105 million was in fact not the property of BCRA held for its own account, but was the property of the Republic," Griesa wrote in his ruling for the plaintiffs in the case.
The plaintiffs in the case are EM Ltd and NML Capital. The latter is an affiliate of Elliott Management Corp and one of the biggest holders of Argentine defaulted debt.
A spokesman for Elliott said the company had no comment.
The judge rejected arguments by the Argentine government that the Central Bank funds are immune because the bank is autonomous.
Wednesday's ruling came a week before Argentine President Cristina Fernandez's cash-strapped government seeks to woo investors by swapping some $20 billion in defaulted bonds left over from the country's massive 2002 default.
Next week's swap offer is meant to neutralize the threat of lawsuits from so-called holdout bondholders who are trying to recover the full, face value of their defaulted debt.
They rejected a previous government offer to swap the paper at a steep discount in 2005.
The bondholders have won several judgments against Argentina in U.S. courts, but so far they have not been able to seize any Argentine money or property.
Argentina argues that bondholders who did not accept the terms of the 2005 exchange cannot be paid the full face value of their debt because that would be unfair to those who did accept losses in the deal.
A Central Bank spokesman did not immediately have comment on Wednesday's ruling, but it is likely to be appealed.
An attachment is a step in the process in which a plaintiff could actually receive money. Other filings and procedures would have to be completed before payment.
Argentine bond prices closed down 0.8 percent on average in local, over-the-counter trade in reaction to news of the ruling, which investors initially thought might refer to a new embargo on Argentine funds in the United States.
The spread between the yield on benchmark Argentine bonds and on comparable U.S. Treasuries widened 21 basis points to 636, according to the JP Morgan Emerging Markets Bond Index 11EMJ.
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