MercoPress. South Atlantic News Agency

Argentina requests a 'stay' order on the ruling favoring holdout creditors

“We consider it essential that Judge Griesa issue a stay so that Argentina can continue paying the holders of restructured bonds”, said Kicillof

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 possible new default. The country is in a 12-year-old legal fight with investors who declined to participate in bond restructurings (2005 and 2010) after the country defaulted on 100 billion dollars in sovereign debt in 2002.

 Without a stay on a ruling against Argentina by U.S. District Judge Thomas Griesa, the government would be legally barred from making a June 30 coupon payment on its restructured bonds unless it also 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 on Monday.

Lawyers for the ministry filed a letter with Griesa asking for the stay, saying it was needed in order 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 on time, it would have a 30-day grace period before falling into technical default.

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 by the markets, and local financial asset prices rose on Monday thanks to President Cristina Fernandez's recent reversal of her policy of not negotiating with holdouts.

She had long portrayed them as “vultures” picking over the bones of the 2002 debt crisis, which thrust millions of middle-class Argentines into poverty.

However the two-term leader has lowered the rhetoric in her speeches lately, but her government splashed advertisements in leading US newspapers over the weekend accusing the holdouts of pushing the country to the brink of financial catastrophe.

More than 90% of bondholders accepted the restructurings, which left them with less than one-third of the original value of their bonds.