(Adds context, closing market levels, Breakingviews link)
By Hugh Bronstein
BUENOS AIRES, June 23 Argentina asked a U.S.
judge on Monday to issue a stay of his ruling against the
country in its case against "holdout" creditors, as it sought to
avoid a new default that would further punish an economy already
slipping into recession.
The move is the latest twist in a 12-year-old battle with
investors who refused to take part in bond restructurings after
Argentina failed to pay about $100 billion of debt in 2002.
Without a stay on a ruling by U.S. District Judge Thomas
Griesa, Argentina would be legally barred from making a June 30
coupon payment on its restructured bonds unless it pays $1.33
billion to holdouts seeking full payment of the debt they hold.
"We consider it essential that Judge Griesa issue a stay so
that the republic of Argentina can continue paying the holders
of restructured bonds," Economy Minister Axel Kicillof told
reporters in Buenos Aires.
Lawyers for the ministry asked Griesa for the stay to "allow
the Republic to engage in a dialogue with the plaintiffs in a
reasonable time frame for these kinds of negotiations."
If the government does not make the June 30 payment, it has
a 30-day grace period before falling into technical default.
A framework for talks between the holdouts and Argentina
started taking shape when Griesa appointed New York financial
trial lawyer Daniel Pollack as a special master to assist in the
negotiations. Pollack told Reuters he plans on "moving as
quickly as possible given the time constraints."
The government also announced on Monday that the economy
contracted in the first quarter after shrinking in the last
three months of last year. The shrinkage was expected and local
financial asset prices rose on Monday thanks to President
Cristina Fernandez's reversal of her policy of not negotiating
She has long portrayed them as "vultures" picking over the
bones of the 2002 debt crisis, which thrust millions of
middle-class Argentines into poverty.
The two-term leader has dialed back the rhetoric in her
speeches lately, but her government splashed advertisements in
leading U.S. newspapers over the weekend accusing the holdouts
of pushing the country to the brink of financial catastrophe.
More than 90 percent of bondholders have accepted the
restructurings, which left them with less than one-third of the
original value of their bonds.
FINANCIAL MARKETS RALLY
Over-the-counter local bonds closed up 5.5 percent
on Monday. The Merval stock index rose 8.7 percent and
the peso strengthened 4.62 percent to 11.90 per U.S. dollar in
black market trade. The official exchange rate
was nearly unchanged at 8.1325 to the dollar.
Restructured Argentine bonds, already higher on speculation
a deal will be reached, added to gains after a flurry of
headlines from Buenos Aires and New York.
The 2033 Discount Bonds traded up 9.99 points
in price to bid 88.22, driving the yield down to 9.82 percent,
according to Thomson Reuters data. The Argentine Par bonds
maturing in 2038 rose 2.01 points in price to bid
48.33, pushing the yield down to 9.08 percent.
Argentina's international bonds have not traded at better
levels since August 2011.
(Additional reporting by Alexandra Ulmer and Walter Bianchi in
Buenos Aires and Daniel Bases and Joseph Ax in New York; Editing
by Meredith Mazzilli, Kieran Murray, Chizu Nomiyama, Jeffrey
Benkoe and Andre Grenon)