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U.S. court blocks Argentina's debt payment

U.S. court blocks Argentina's debt payment

Posted by Liliana Castaño on June 26, 2014

 Argentina has deposited the next payment needed to avoid a default on its restructured bonds, but a U.S. federal court decided on Thursday not to let the payment go through

Both moves increased the stakes in a 12-year legal chess game between Argentina and creditors who refused to accept the downgraded terms offered by the country's 2005 and 2010 debt restructurings and are suing for full repayment.

Argentina will have the month of July to negotiate with its holdout creditors before falling into technical default. The next payment is due on Monday, but with that payment having been blocked by the courts, Buenos Aires will have a 30-day grace period to strike a deal with holdout creditors.

If it fails, Latin America's No. 3 economy would be pushed into another painful default at the end of next month.

Economy Minister Axel Kicillof said Argentina owes a $832 million coupon payment on restructured bonds on Monday.

"Of that total, $539 million was deposited in the accounts ... of the Bank of New York Mellon at the Central Bank of Argentina," Kicillof said. "With this act, we ratify our willingness to pay."

"We affirm our commitment to honor our debt to all creditors," he added.

But in order to pay holders of the country's restructured bonds, Argentina needed a stay to be issued by U.S. District Judge Thomas Griesa in New York. He denied the Argentina's stay request about an hour after Kicillof said the deposit had been made.

Argentina's financial market slipped only slightly on the news of Griesa's rejection, as investors bet that the country will use the 30-day grace period to strike a deal with the holdouts.

Griesa has ordered Ar

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