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By Daniel Bases
NEW YORK, July 16 A U.S. judge said in New York on Wednesday that he would hear arguments next Tuesday related to the banks and payment agents caught up in Argentina's sovereign debt case as a potential default looms at the end of the month.
U.S. District Judge Thomas Griesa has received motions from the Bank of New York Mellon , the indentured trustee that currently holds a deposit from the government of $539 million in its account at the Central Bank of Argentina, on what it should do with the money.
In addition, the lead holdout, NML Capital Ltd, a subsidiary of Elliott Capital Management, has filed a motion, as have bondholders with euro-denominated Argentine debt, payment systems Euroclear Bank, Clearstream Banking and JPMorgan Chase & Co.
The holdouts are investors who spurned the terms of Argentina's 2005 and 2010 debt restructuring following a $100 billion government default in 2002. Griesa has ordered that Argentina either pay the holdouts $1.33 billion plus accrued interest at the same time it pays restructured bondholders or no one should be paid.
All sides face a July 30 deadline for Argentina to either pay up, reach a deal with the holdouts or face default.
The two sides have met separately with court-appointed mediator Daniel Pollack in New York but have yet to sit down and have a face-to-face discussion, although both profess to want to negotiate.
Argentina's U.S. dollar-denominated debt cut its losses after word of the hearing came out given no further talks with Pollack were publicly scheduled. The 2033 Discount bonds snapped higher, to a small gain of 0.07 point in price to bid 89.16 points. That drove the yield down to 9.7 percent from 11.30 percent.
Argentine officials have said they want to negotiate a deal covering 100 percent of its bondholders, not just the holdouts. For years, Argentina shunned negotiations with the holdouts, portrayed by President Cristina Fernandez as "vultures" picking on the bones of Argentina's shattered economy 12 years ago.
Holdouts have said they are willing to discuss an accommodation to let the government pay bondholders who accepted Argentina's restructuring terms as they face a default in two weeks if negotiations to settle the dispute have made good progress before the July 30 deadline.
The government says it cannot voluntarily offer better terms for a restructuring with holdouts because of a provision called the Rights upon Future Offers, or RUFO, which expires on Dec. 31. It is designed to prevent anyone from getting a better deal than the exchange bondholders.
Legal experts have not dismissed the clause as a hurdle to a deal, but they also believe it can be overcome.
Sources in the finance sector say there are perhaps half a dozen banks preparing potential plans to present to Argentina and the holdouts as part of a comprehensive plan for settling the dispute should the legal hurdles such as RUFO be overcome.
While Argentina's legal recourse has been exhausted as the holdouts' case has been upheld on appeal and denied a hearing by the U.S. Supreme Court, they have taken their fight to the court of public opinion.
Both sides have spent hundreds of thousands of dollars on newspaper advertisements globally, arguing their sides of the case in an effort to inoculate themselves against accusations that they are at fault for any default.
The latest came on Wednesday with a full-page advertisement placed in Argentina's El Cronista daily by the American Task Force Argentina (AFTA), a lobbyist acting for the New York hedge funds, saying, "Time is running out for Argentina."
Argentina's embassy to the United States in Washington tweeted on Wednesday: "It is time for vultures to stop lying and speculating with the future of 40 million Argentines." (Reporting By Daniel Bases; Editing by Meredith Mazzilli and Jonathan Oatis)