(Refiles to fix typo in headline)
BUENOS AIRES, June 22 Argentina is considering making an initial payment to "holdout" creditors before asking to extend negotiations to officially reach a settlement next January to avert a disastrous debt default, a leading local newspaper said on Sunday.
Argentina has been locked for more than a decade in a fight in U.S. courts with creditors who refuse to accept a 2005 and 2010 revamp of debt securities and demand to be repaid in full.
La Nacion newspaper cited unnamed government officials as saying President Cristina Fernandez was considering paying these holdout creditors between $300 million and $400 million as a sign of good faith.
"The initial sum would be equivalent to a 65 percent reduction compared with what was paid to restructured bondholders who entered the 2005 and 2010 swaps," La Nacion quoted a government official as saying.
The Argentine government would then seek to extend negotiations and in 2015 to clinch a payment deal in the form of long-term bonds, similar to deals reached with the Paris Club or Spain's Repsol, the paper added.
The government was not immediately available for comment. Such a plan could only work with the agreement of the hedge funds who demand full payment and of the U.S. judge hearing the case, and that is far from guaranteed.
Lawyers representing Argentina have said officials will travel to the United States this week for negotiations.
U.S. courts have ruled that Argentina cannot continue to pay creditors who agreed to restructure their bonds after its 2001-02 default on $100 billion in debt unless it also pays $1.33 billion to the holdouts demanding full payment.
Fernandez, a leftist, had refused to even consider negotiating with the holdouts. She has portrayed them as "vultures" picking over the bones of the 2002 debt crisis, which thrust millions of middle-class Argentines into poverty.
But in a shift, she said on Friday her government would negotiate with all of Argentina's creditors in a bid to avoid a new debt default that would further harm the ailing economy.
A provision called Rights upon Future Offers (RUFO), which expires on Dec. 31, precludes Argentina from voluntarily agreeing better terms with the holdouts, complicating negotiations this year.
The next bond payment is due on June 30. If Argentina does not make that payment on time, it would have a 30-day grace period before falling into technical default
To avert another catastrophic default, La Nacion said the government would ask U.S. courts to reinstate a stay on an injunction that bars payment to exchange bondholders via the U.S. banking system unless holdouts are paid at the same time.
"Officializing (a deal) in January would allow for the end of the RUFO clause," La Nacion quoted a government source as saying. "We depend on (U.S. District Court Judge Thomas) Griesa."
Holdout creditors are led by NML Capital Ltd, a division of billionaire Paul Singer's Elliott Management Corp, and Aurelius Capital Management, chaired by Mark Brodsky.
While many Argentines detest the holdout creditors, there is a growing push for a deal to avert another crisis and put the debt saga to bed.
Faced with dwindling foreign exchange reserves, a looming recession and a $6 billion principal and interest payment on another bond that matures next year, Argentina cannot risk closing the door on access to international capital markets to solve a coming cash crunch, experts say. (Reporting by Jorge Otaola; Writing by Alexandra Ulmer; Editing by Gareth Jones)