NY court hands Argentina setback over bond default

NEW YORK: Argentina suffered a setback related to its massive 2002 debt default when New York's highest court said the country should keep paying interest on some bonds even after they mature or are accelerated.

The New York State Court of Appeals said the contracts underlying the bonds "must be enforced according to the language adopted by the parties, particularly here where Argentina drafted the bond documents."

The case had been brought by investors who had bought floating-rate notes that Argentina issued in 1998. Most of the notes matured in April 2005, and one of the plaintiffs had accelerated some of the notes two months earlier.

The 2nd Circuit US Court of Appeals, a federal court, had asked New York's highest court to interpret state law concerning the amount of time that Argentina should be required to pay interest. Following Thursday's ruling, the case returns to the 2nd Circuit.

Copyright Reuters, 2011