Argentina suffered a stinging blow late on Wednesday when a New York federal judge ordered immediate payment to holders of defaulted bonds, citing threats by the country's leaders to defy his rulings in a decade-old dispute, Reuters reported. In an ruling delivered just as the United States headed off for its Thursday Thanksgiving holiday, U.S. District Judge Thomas Griesa rejected Argentina's request to maintain his previous order halting payments to holdout investors who did not participate in two bond exchanges of defaulted sovereign debt. If Griesa's ruling is upheld and Argentina chooses to defy him, U.S. courts could ultimately inhibit debt payments to creditors who agreed to the swaps out of consideration for investors who rejected Argentina's terms at the time. That would trigger a technical default on approximately $24 billion worth of debt issued in the 2005 and 2010 exchanges, although Argentina has said it will keep making routine repayments and that funds deposited for creditors within the South American country cannot be seized. Argentina still has several appeal options, but Griesa's decision to lift his stay leaves the country exposed in the meantime, legal specialists and economists say. "We're cornered," said former Finance Secretary Miguel Kiguel. The ruling is the latest development in a litigation saga that has lasted more than ten years and now appears to be favoring holdout bond investors such as Elliot Management Corp's NML Capital Ltd and Aurelius Capital Management. Last week, Argentina, which defaulted on its bonds in 2002, asked Griesa to keep his stay order in place while the U.S. 2nd Circuit Court of Appeals for New York considered the country's request for a revisitation of an unfavorable ruling in October. Griesa wrote that he would ordinarily leave his order in place pending a ruling from the 2nd Circuit. However, he concluded this was not possible given comments from Argentine officials, including President Cristina Fernandez, that Argentina would not pay anything to the holdout bondholders. "It is the view of the District Court that these threats of defiance cannot go unheeded, and that action is called for," Griesa wrote, saying the payments should be made as soon as possible. The 2nd Circuit already upheld Griesa's Feb. 23, 2012 decision that Argentina violated equal-treatment provisions for all creditors when it chose to pay exchange bondholders and not holdout bondholders. Given that Griesa's latest decision still needs the final blessing of the 2nd Circuit, he ordered that rather than Argentina paying the plaintiffs directly, it should deposit the money in an escrow account by Dec. 15. Griesa was unconvinced by Francisco Eggers, Argentina's National Director of the National Bureau of Public Credit, who submitted a signed affidavit last week saying the government would abide by the court's rulings and would not seek to evade its directives. In Buenos Aires, economy ministry officials were discussing the ruling with the country's lawyers and no one could be reached to comment. -- SPA
