(Updates with further details from court hearing, background on the litigation)
By Nate Raymond
NEW YORK, Feb 24 (Reuters) - Major creditors suing Argentina over defaulted bonds have agreed to the economic terms of an agreement to resolve the long-running litigation but need more time to complete the $5 billion deal, a lawyer for the investors said Wednesday.
The disclosure came during a hearing before a federal appeals court in New York, where the panel said it will allow a U.S. judge to move forward with lifting injunctions that restrict Argentina from paying off some debts.
Matthew McGill, a lawyer representing creditors Elliott Management's NML Capital and Aurelius Capital Management, said his clients "have had an agreement on economic terms with Argentina since Thursday."
McGill called it a "$5 billion transaction." But McGill said his clients needed more time beyond a Monday deadline imposed by Argentina for bondholders to agree to participate in the country's offer to pay $6.5 billion to resolve various lawsuits.
"If we have just a little time we can finish the deal," he said.
To get that extra time, McGill urged the 2nd U.S. Circuit Court of Appeals to not dismiss various appeals by Argentina that, while pending, prevented U.S. District Judge Thomas Griesa from lifting the injunctions.
Griesa signalled on Friday he would lift the injunctions but said he lacked jurisdiction to do so while the appeals were pending.
While the panel said it would dismiss the appeals as Argentina requested, the judges said they would direct that any order by Griesa putting Friday's decision into effect be put on hold for two weeks to allow bondholders to file an appeal.
Michal Paskin, a lawyer for Argentina, said the country itself would like any appeal of Griesa's order to occur as "quickly as possible" to provide certainty amid its settlement efforts.
"Without that, it makes the entire situation untenable," he told the court.
The proposed $6.5 billion settlement offer announced by Argentina on Feb. 5 represents a 27.5 percent to 30 percent discount for creditors who filed claims of about $9 billion.
The settlements are conditioned on the approval of the Argentine Congress and the lifting of injunctions in the litigation.
Mark Brodsky, the Aurelius chairman, declined to comment through a spokesman. Calls to Elliott Management were not immediately returned.
A spokeswoman for the Argentine economy ministry had no immediate comment.
The Argentine stock market and locally traded over- the-counter bonds cut some early-day losses but were largely unchanged after terms of an agreement were disclosed.
Investors had already factored in an eventual deal between the government and its holdout creditors. (Reporting by Nate Raymond and Jonathan Stempel; Writing by Daniel Bases; Editing by Chizu Nomiyama, Jeffrey Benkoe, Diane Craft)