UPDATE 3-U.S. judge holds Argentina in contempt over bond payment plan
(Adds details from hearing, background on litigation)
By Joseph Ax and Nate Raymond
NEW YORK, Sept 29 (Reuters) - In a rare move, a U.S. judge held Argentina in contempt on Monday, saying the country is taking "illegal" steps to evade his orders in a longstanding dispute with hedge funds over defaulted debt.
A source at Argentina's central bank nevertheless said the country plans to deposit an interest payment at a local bank on Tuesday, in direct defiance of U.S. District Judge Thomas Griesa's admonitions.
Griesa, who has overseen the litigation in New York for years, put off a decision on imposing sanctions on the South American country, which defaulted in July for the second time in 12 years after failing to reach a deal with the hedge funds.
But Griesa issued a clear warning that the country must stop efforts to get around his rulings by making payments in Argentina.
"These proposed steps are illegal and cannot be carried out," Griesa said, his voice rising, during a court hearing in lower Manhattan.
Those steps, he said, include legislation Argentina passed that would allow it to replace Bank of New York Mellon Corp as trustee for some restructured debt with Banco de la Nacion Fideicomiso while allowing a swap of that debt for bonds payable in Argentina under its local laws.
Despite his ruling, Argentina plans to deposit an interest payment of at least $200 million with Banco de la Nacion Fideicomiso on Tuesday, the central bank source said. Continuación...