* Will keep paying debtholders who agreed to restructuring
* Will not allow 'vulture funds' to block payments
MEXICO CITY, Nov 5 (Reuters) - Argentina will use all legal means to defend its position against a U.S. court ruling that would force the country to repay creditors who sued to collect on defaulted Argentine bonds, Economy Minister Hernan Lorenzino said on Monday.
Argentina staged the world's biggest sovereign debt default in 2002 during a deep economic crisis. About 93 percent of Argentine bondholders agreed to swap their defaulted debt for new issues in 2005 and 2010, but ``holdout'' creditors who rejected the swaps continued to press for full repayment on the bonds in courts throughout the world.
Late last month, a federal appeals court in New York ruled that Argentina violated bond provisions to treat all creditors equally when it made payments to creditors who accepted the swaps, while refusing to pay the holdouts.
Lorenzino said Argentina would honor debt payments to bond holders who agreed to the restructuring.
``We will use all (legal) avenues to continue defending Argentina's position before the courts,'' Lorenzino told reporters on the sidelines of the G20 meeting of finance chiefs in Mexico City.
``We will not allow the actions of vulture funds to prevent Argentina from honoring its commitments to bondholders who agreed to the debt restructuring.''
Fitch put Argentina's foreign currency ratings on watch negative in late October, saying the ruling ``increased uncertainty about Argentina's ability to service its international securities issued under New York law on a timely basis using the U.S. financial system.''
Argentina has stayed out of global credit markets since its 2002 debt debacle, partly due to fears the holdouts could block a new issue. It relies instead on the central bank's foreign reserves to pay debt, but its efforts to safeguard those funds using capital controls and import curbs have worsened an economic slowdown.