U.S. judge declines to find Argentina in contempt of court

NEW YORK Thu Aug 21, 2014 4:57pm EDT

NEW YORK Aug 21 (Reuters) - U.S. District Judge Thomas Griesa on Thursday declined to find Argentina in contempt of court for its proposal to bring defaulted sovereign debt under local law.

Griesa said the proposal unveiled by Argentine President Cristina Fernandez on Tuesday was illegal but that a contempt order now would not help bring about a settlement in the case between the Republic and deep-pocketed holdout creditors.

Holdout investors NML Capital Ltd, an affiliate of Elliott Management Corp and Aurelius Capital Management asked Griesa to issue a contempt order, in the latest twist of its longstanding battle to collect on its court award of $1.33 billion plus interest on defaulted debt. They said Argentina's proposal, which is being brought before its congress, would violate Griesa's anti-evasion rulings that payments not be shifted outside of the U.S. court's jurisdiction.

Griesa reiterated that he hoped there would be a settlement in the case. "It does not add anything to the scales of settlement to make a finding of contempt," Griesa said. (Reporting By Nate Raymond and Joseph Ax; Writing by Daniel Bases and Noeleen Walder; Editing by Diane Craft)