By Nate Raymond
NEW YORK, Nov 1 (Reuters) - A U.S. appeals court on Friday said it would leave a freeze in place on an order requiring Argentina to pay $1.33 billion to bondholders suing for repayment in the wake of the country's 2002 default.
The 2nd U.S. Circuit Court of Appeals in New York denied a motion to lift a stay it issued in favor of Argentina, pending U.S. Supreme Court review of a ruling for the holdout bondholders in August.
The request to lift the stay was made Oct. 15 by bondholders led by hedge funds NML Capital Ltd, a unit of Elliott Management Corp, and Aurelius Capital Management LP.
The case is one of many lawsuits filed by bondholders in the wake of Argentina's $100 billion sovereign default in 2002.
"The court's order confirms that the legal procedures pursued by Argentina are right and we ratify that Argentina will exercise its defense in all available judicial bodies," Argentinas Finance Secretary Adrian Cosentino said in a statement.
In two restructurings, creditors holding about 93 percent of Argentina's bonds agreed to swap out their bonds in deals that gave them 25 cents to 29 cents on the dollar.
But bondholders who did not participate in the restructurings, including NML and Aurelius, sued for full payment. The litigation was filed in New York under the terms of the bond documents.
In 2012, U.S. District Judge Thomas Griesa ruled Argentina had violated a clause requiring the equal treatment of creditors. The 2nd Circuit largely upheld that order in a decision that the U.S. Supreme Court recently declined to review.
As part of its October 2012 decision, the 2nd Circuit sent the case back to Griesa to clarify how the injunctions he had issued would function.
Griesa issued a new order last November that required Argentina to pay $1.33 billion into a court-controlled escrow account in favor of the holdout bondholders.
The 2nd Circuit upheld that decision, but stayed its impact pending a second appeal by Argentina to the U.S. Supreme Court.
After the 2nd Circuit's ruling, Argentine President Cristina Fernandez pitched a voluntary swap of foreign debt in exchange for bonds governed by local law. But Judge Griesa said last month the proposal would violate an injunction he had issued.
Argentina said in a court filing late Friday that it would appeal that order.
Following Griesa's latest order, NML and Aurelius asked the 2nd Circuit to lift its stay.
A three-judge panel denied that request on Friday. A spokeswoman for Aurelius declined to comment. NML did not immediately respond to requests for comment.
The case is NML Capital Ltd et al v. Republic of Argentina, 2nd U.S. Circuit Court of Appeals, No. 12-105.