April 2, 2013 / 9:47 PM / 6 years ago

Court demands Argentine bondholders address pay plan

NEW YORK (Reuters) - A appeals court on Tuesday gave holders of defaulted Argentina debt three weeks to respond to the country’s proposed plan to pay them much less than the $1.33 billion they have sued to collect.

The 2nd U.S. Circuit Court of Appeals in New York directed holdout bondholders who did not participate in Argentina’s two debt restructurings following its 2002 default to submit a response by April 22.

These holdouts are led by NML Capital Ltd, a unit of billionaire hedge fund manager Paul Singer’s Elliott Management Corp, and Aurelius Capital Management. Representatives for the funds declined on comment.

Tuesday’s brief order likely delays any definitive ruling from the 2nd Circuit until at least late April.

On Friday, Argentina submitted a payment proposal offering the holdouts, which the country calls “vultures,” just one-sixth of the money they say they are owed.

The litigation arises from the country’s $100 billion sovereign debt default in 2002. Uncertainty over the case has already rattled Argentine credit markets and created fears of a new default.

About 92 percent of Argentina’s bonds were restructured in 2005 and 2010, with holders receiving 25 cents to 29 cents on the dollar.

But the holdouts demanded full payment, and won a victory in October when the 2nd Circuit said Argentina violated a clause in bond documents that required equal treatment of creditors.

Then in November, U.S. District Judge Thomas Griesa ordered Argentina to pay the $1.33 billion into an escrow account before making its next interest payment to creditors who participated in the restructurings.

The 2nd Circuit heard Argentina’s latest appeal on February 27.

Argentina’s latest payout plan followed terms accepted by bondholders who swapped their debt in the 2010 restructuring.

Argentina said its plan has an estimated value for NML of $120.6 million, one-sixth of the $720 million it would receive under Griesa’s order. Argentina has estimated that NML paid just $48.7 million for its bonds in 2008.

The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.

Reporting by Nate Raymond in New York; Editing by Steve Orlofsky

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