UPDATE 1-Holdout investors seek deposit from Argentina by Dec. 10
* Appeals court halted $1.33 bln payment order on Wednesday
* Holdouts want court to order Argentina to post bond
* They say Argentina won't comply, plans to evade rulings
* Markets watch case closely, fear possible default
Dec 1 (Reuters) - Investors suing over Argentina's 2002 debt default have asked a U.S. court to order the country to post a security deposit of at least $250 million by Dec. 10, while an appeal of a lower court's order is pending.
In an emergency motion filed late on Friday, the "holdout" creditors urged the 2nd U.S. Circuit Court of Appeals to modify its ruling from Wednesday that halted an order for Argentina to deposit $1.33 billion into an escrow account by Dec. 15 on the investors' behalf.
The decision eased fears that Argentina could default in the coming weeks, but the holdouts say it is too lenient and gives the government more time to plot a way around court rulings. Officials at the Argentine Economy Ministry declined to comment.
The holdouts are seeking to be repaid in full on their defaulted Argentine bonds after spurning debt exchanges in 2005 and 2010 that about 93 percent of other bondholders accepted. Argentina calls the litigating funds "vultures" and has vowed never to pay them.
The latest battle centers on a ruling that found Argentina violated a bond provision requiring it treat all creditors equally when it paid the exchange bondholders without paying the holdouts. Two U.S. courts have said they should all be paid simultaneously.
On Nov. 21, U.S. District Judge Thomas Griesa ordered Argentina to deposit the $1.33 billion for holdouts including NML Capital Ltd and the Aurelius Capital Management funds by Dec. 15, the same day about $3 billion comes due on growth-linked GDP warrants, issued during Argentina's debt swaps.
This raised fears of another default because if Argentina had refused to pay the holdouts, as expected, U.S. courts could have disrupted payments to the holders of restructured bonds.
Argentina appealed the orders and won an emergency stay, or halt, from the 2nd Circuit Court.
NML and Aurelius argue, however, that Argentina should have to post a security deposit of $1.45 billion, or at least $250 million, by Dec. 10 to ensure the country complies with the court orders if it loses the appeal.
"If Argentina refuses to post even that minimal security even as it prepares to pay more than $3 billion to exchange bondholders, that will amply demonstrate its intention not to comply with this court's mandates and that the stay should be lifted," lawyers for the holdout investors wrote.
The funds cited statements by Argentine officials saying they would not pay the holdouts but would keep servicing the restructured bonds as evidence they plan to evade the rulings by creating an alternative payment scheme for exchange bondholders.
The country will not have to pay anything on its restructured debt again until March 2013, when interest comes due on its Par bonds.
"The emergency giving rise to this motion is that if Argentina is not required to post security as a condition for maintaining the stay when its December 2012 payments on the exchange bonds come due, Argentina will have at least an additional three months to continue developing its scheme to attempt to evade the injunction," the holdouts' lawyers wrote.
They said if the 2nd Circuit does not agree that Argentina must make a security deposit, then it should consider expediting the case so that it can be resolved before Dec. 31, when the country must pay $500 million to service restructured bonds.
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