By Nate Raymond
NEW YORK (Reuters) - Argentina urged a U.S. appeals court on Friday not to lift a hold on an order requiring it to pay $1.33 billion to bondholders who are suing for repayment following the country's historic default in 2002.
In a late-night filing, the South American country asked the 2nd U.S. Circuit Court of Appeals in New York to leave a stay in place pending a U.S. Supreme Court review of a court ruling in favor of holdout bondholders.
"Vacating the stay now will expose the Republic and innocent third parties to a potential court-ordered default on over $24 billion," Argentina's lawyers wrote.
The case flows out of Argentina's $100 billion sovereign debt default in 2002.
Two restructurings in 2005 and 2010 saw creditors holding around 93 percent of Argentina's debt agree to swap their bonds in deals giving them 25 cents to 29 cents on the dollar.
But bondholders who did not participate in the swaps, led by hedge funds Elliott Management Corp's NML Capital Ltd and Aurelius Capital Management LP, went to court in New York to seek full payment.
Argentine President Cristina Fernandez has pledged to keep paying the restructured debt but has vowed to never to pay more than other creditors received. That has created investor concern that the country could enter into a new technical default in order to avoid paying the holdouts.
The case was filed in New York under the terms of the bond documents.
In 2012, U.S. District Judge Thomas Griesa found that Argentina violated a clause in the bond documents requiring the equal treatment of creditors.
The 2nd Circuit largely upheld that decision in October 2012, in a ruling the U.S. Supreme Court this October declined to review. But the appeals court sent the case back to Griesa to determine how an injunction he had issued would work.
In November 2012, Griesa ordered Argentina to pay $1.33 billion into a court-controlled escrow account in favor of the holdout bondholders. The 2nd Circuit affirmed that holding in August.
In September, Argentina asked for a so-called en banc rehearing before the full 2nd Circuit, setting the stage for what is expected to be another appeal to the Supreme Court.
As part of its August decision, the 2nd Circuit stayed its impact pending review of the Supreme Court, giving Argentina and nervous investors some relief.
Following the August ruling, Fernandez proposed a voluntary swap of foreign debt in exchange for bonds governed by local law. But Griesa on October 3 issued an order declaring the proposal would violate an injunction he issued previously in the case.
After Griesa's order, NML and Aurelius asked the 2nd Circuit to lift its stay, saying the "equitable calculus has fundamentally changed."
But Argentina in its brief on Friday said the holdouts "are wrong to claim that there is a 'plan to evade,' or that the Republic has been deficient in responding to disclosure requirements of the district court concerning any alleged plans."
Argentina's lawyers added that the holdout's efforts were not only directed at avoiding Supreme Court review but, "to be blunt, their effort to profit from side bets on market uncertainty and a risk of default."
Representatives for NML and Aurelius did not immediately respond to requests for comment after normal business hours.
The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.
(Reporting by Nate Raymond in New York; Editing by Michael Perry)