* Gov't says debt repayments made outside United States
* Holdout ruling raises "technical default" fears
* Argentine president vows not to pay "vulture funds"
By Alejandro Lifschitz and Daniel Bases
BUENOS AIRES/NEW YORK, Nov 16 Argentina's
government will tell a U.S. judge on Friday that sovereign debt
repayments are made outside the United States, making them
immune to U.S. law and seizures by holdout bondholders, the
South American country's state news agency reported.
Argentina is fighting an October ruling by a U.S. federal
appeals court that would force the government to pay holdout
creditors owning bonds that have been in default since 2002. It
is due to present papers by midnight.
The U.S. 2nd Circuit Court of Appeals in New York last month
ruled that Argentina discriminated against bondholders who
refused to take part in two debt restructurings as the nation
tried to recover from a $100 billion default a decade ago.
The ruling sparked fears that U.S. courts could inhibit debt
payments to creditors who accepted terms of the restructuring,
out of consideration for investors who rejected Argentina's
terms at the time. This would trigger a technical default.
The appeals court, however, referred the case back to the
U.S. District Court to address the technical questions of just
how debt payments would be calculated and how to treat the
involvement of third-party banks such as Bank of New York
Mellon, which act as transfer agents for money owned exchange
Argentine President Cristina Fernandez said recently that
her country will not pay "one dollar to the vulture funds," her
term for the holdout investors who buy distressed or defaulted
debt and then sue in international courts to get paid in full.
Fernandez has vowed to keep making payments to other creditors.
State news agency Telam said the government would argue that
the repayments were "immune to U.S. law" because "the payment of
creditors is conducted outside that country."
"When the money arrives in New York, it already belongs to
the creditors, not to Argentina," it quoted an unnamed official
source as saying.
Argentine bonds closed up 1 percent on average in
over-the-counter trade in Buenos Aires on Friday, after
accumulating a loss of 4.1 percent in the previous three
"The move by Argentina put a floor under debt prices,
because if it works it could create a buying opportunity," said
Ruben Pascuali, a trader at local brokerage Mayoral Bursatil.
Bank of New York Mellon, which transfers funds from
the Argentine government to the country's bond holders, is
expected file a statement on its position to U.S. District Court
Judge Thomas Griesa on Friday, a source familiar with the bank's
thinking on the matter told Reuters.
The bank is going to argue it is not an agent of Argentina
but rather a "duty bound" indentured trustee there to enforce
the rights of investors who exchanged their bonds in 2005 and
2010, the source said.
The bank wants the lower court's order from Griesa, which
currently has all payments halted, to remain in place until the
full appeals process has run its course, the source said.
That means after Griesa addresses the two technical
questions set by the appeals court, BNY Mellon wants him to keep
the payments frozen until the 2nd Circuit reviews and rules on
The deadline for parties to present their positions to
Griesa is Friday at 11:59 p.m. EST (0459 GMT, Saturday). The
judge is expected to make a speedy response given Argentina is
due to start making $3.3 billion worth of payments to exchange
bondholders starting Dec. 2. Griesa's ruling will automatically
return to the appeals court for review.
In a court filing this week, Elliott Management Corp's NML
Capital Ltd and two Aurelius Capital Management funds urged
Griesa to lift his Feb. 23 stay on payments pending appeal.
October's ruling by the appeals court largely upheld
injunctions issued in February by Griesa in favor of the
holdouts, which own approximately $1.4 billion of defaulted
The holdouts warned in their argument to Griesa that terms
of the swapped Argentine bonds may allow the country to
circumvent the United States by using subsidiaries in London and
Luxembourg to make debt payments.