MercoPress. South Atlantic News Agency

Argentine bonds unfrozen but held for appeal

A New York federal judge on Tuesday unblocked freezes put on up to $7 billion in defaulted Argentine bonds but then agreed to keep the freezes in place while creditors appealed the ruling.

At the peak of a serious economic crisis in 2002, Argentina defaulted on debt worth $81.8 billion, which totals $102.6 billion with past due interest.

After three years, 76 percent of creditors agreed to an Argentine swap offer representing an estimated 70 percent loss on their holdings. Argentina's clearing agent, the Bank of New York, was due to complete the swap on Friday.

Judge Thomas Griesa last week froze $7 billion in old bonds tendered through BoNY on behalf of Cayman Island-based investor NML Capital, one of many holdout creditors hunting down seizable Argentine assets while suing for its cash.

Griesa also granted another creditor group, EM Ltd, a restraining order on the old paper.

In a court packed with Wall Street bankers on Tuesday Griesa first lifted the freezes on the bonds, saying that until they were exchanged they belonged to old bondholders, not to Argentina, and therefore were not fair game for attachment.

He also said it would be impossible to oblige Argentina to tender the new bonds if the freezes were in place.

David Rivkin, a lawyer for EM Ltd, argued that creditors would not have time to appeal the ruling before the swap was due to go ahead on Friday and asked for the freezes to be kept in place until they had a reply from the appeals court.

"I'm going to grant the motion," said Griesa. "It's a little hard to believe that the court of appeals could make a ruling by April 1."

Griesa said it was not a major problem "if there is a short delay in the closure of the exchange offer."

Argentina's government said it was pleased with the ruling and hoped for a quick and favorable verdict from the Appeals Court.

"The economy ministry hopes the Appeals Court meets quickly and rules shortly to allow for the completion of the bond swap within the timeline set for the operation," the government said in a statement.