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* Holdout creditors say not an injustice to be paid
* Argentina says case could threaten billions in debt
* US appeals court showdown set for Feb. 27
By Martha Graybow and Jonathan Stempel
NEW YORK, Jan 25 (Reuters) - Investors who refused to join two sovereign debt restructurings by Argentina are urging a U.S. court to force the country to pay them, in a case whose outcome could make it much harder for emerging market countries facing cash crunches to borrow money.
These investors, who own Argentina bonds that have been in default for a decade, are demanding the $1.33 billion that a federal judge said must be paid when the South American country makes a payment on its restructured bonds.
The demand came one month ahead of a Feb. 27 showdown before the 2nd U.S. Circuit Court of Appeals in New York.
Argentina is seeking to have the appeals court overturn a finding in favor of the "holdout" creditors, which are led by NML Capital Ltd, part of a firm run by billionaire hedge fund manager Paul Singer, and the Aurelius Capital Management funds.
But in written arguments submitted to that court on Friday, Aurelius said Argentina must stop going "far beyond the reach of accountability" by letting holdouts go unpaid for more than a decade even as it pays holders of restructured bonds.
"It is hardly an injustice to have legal rulings which, at long last, mean that Argentina must pay the debts which it owes," Aurelius said, quoting an earlier decision in the case.
The case stems from Argentina's $100 billion debt default in 2002, and has been pursued in U.S. courts because they have jurisdiction under Argentina's bond contracts with investors.
NML, an affiliate of Elliott Management Corp, in a separate brief Friday said the "stability of this sophisticated market, and voluntary restructurings in general, depends critically upon courts' willingness to enforce all the terms in such contracts."
NOT ONE DOLLAR
Holdouts refused to take part in debt restructurings in 2005 and 2010 in which about 92 percent of the bondholders received between 25 cents and 29 cents on the dollar.
This stance angered investors who joined the swaps, and Argentina has called the holdouts "vultures."
The 2nd Circuit issued a key decision in October finding that Argentina must treat all bondholders equally, rather than allow holders of restructured debt to have priority.
That largely upheld earlier decisions by U.S. District Judge Thomas Griesa in Manhattan, who oversees much of the litigation.
Then in November, Griesa ordered Argentina to pay $1.33 billion into escrow for the holdouts when it paid restructured bondholders. The 2nd Circuit later put that order on hold so Argentina could appeal.
But Argentina does not want its ability to pay holders of restructured bonds to be conditioned on a requirement that it pay the holdouts.
In a filing last month, Argentina argued that paying the holdouts would threaten its ability to service $24 billion of restructured debt.
It said it could try to resolve the litigation by reopening the restructuring upon legislative approval, but the holdouts are viewed as unlikely to accept that.
NML said Friday it was "difficult to believe" Argentina would avoid making the payment and risk another default when it has $40 billion in reserves.
ADDRESSING SOVEREIGN DEBT CRISES
The case is seen as having broad reach, potentially impeding the abilities of countries to respond to economic crises in the face of resistance from creditors.
And in court papers last year, the U.S. government said that to award full payment to the holdouts could undermine efforts to encourage global efforts to address sovereign debt crises.
A loss for Argentina would be a setback for President Cristina Fernandez, who is trying to avert a potential "technical default" on tens of billions of dollars of debt. She has said the country will not pay "one dollar" to the holdouts.
The case is NML Capital Ltd et al v. Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.