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UPDATE 1-Argentine exchange bondholders to offer solution to end default litigation

Daniel Bases
Monday, 18 Nov 2013 | 6:20 PM ET

litigation@ (Adds detail, NML comment, background, byline)

NEW YORK, Nov 18 (Reuters) - Investors holding restructured Argentine sovereign debt are in the final stages of formalizing a proposal aimed at ending more than a decade of litigation by holdout investors who have refused to participate in two prior sovereign debt exchanges.

"In an attempt to create a solution for a decade-old standoff, exchange bondholders have held several meetings over the last couple of weeks and are forming an ad hoc group and a steering committee to formalize a proposal for a global resolution, end litigation and avoid a default by Argentina," Robert Koenigsberger, managing partner and chief investment officer at Gramercy Funds Management, said in an emailed statement.

Gramercy is a leading member of the so-called exchange bondholders group who participated in the restructurings.

"We are in the final stages of appointing financial and legal advisors and expect to provide more details regarding our plan, which we believe benefits all bondholders, in the coming weeks."

NML Capital Ltd, which is a unit of Paul Singer's Elliott Management Corp, and Aurelius Capital Management are driving the case for holdout investors who refused to participate in the 2005 and 2010 restructurings.

"We welcome the idea of good faith negotiations with Argentina, but we don't see the point of negotiating with other bondholders," an NML spokesman told Reuters.

"We have approached Argentina countless times about negotiating a resolution to this dispute. It is completely within Argentina's power to solve this," the spokesman said.

Earlier on Monday, a U.S. appeals court declined to reconsider an order requiring Argentina to pay $1.33 billion to the holdout bondholders. Argentina defaulted on roughly $100 billion in sovereign debt in 2002, the largest default of its kind at the time.

Buenos Aires is being ordered by a U.S. court to pay the holdouts at the same time it pays exchange bondholders their principal and interest, something the Argentine government said it would never do. Failure to make payments to both groups concurrently would result in a default on the already restructured debt held by Gramercy and the other exchange bondholders.

Creditors holding about 93 percent of the defaulted debt agreed to participate in the debt swaps that gave them between 25 cents and 29 cents on the dollar.

(Reporting By Daniel Bases; Editing by Sandra Maler and Eric Walsh)