Argentina says to formally demand U.S. banks make bond payouts

BUENOS AIRES (Reuters) - Argentina said on Tuesday it will formally demand that intermediary banks charged with delivering the country's debt payments make hundreds of millions of dollars in payouts that were due in June but that have been blocked by a U.S. court.

Argentina defaulted last week after losing a long legal battle with hedge funds that rejected the terms of debt restructurings in 2005 and 2010.

The government deposited payments owed to holders of its restructured bonds with intermediaries Citibank Argentina and Bank of New York Mellon.

U.S. District Judge Thomas Griesa said the deposits were illegal because he had ordered Argentina not to pay restructured bondholders without paying the holdouts at the same time.

The economy ministry late on Tuesday issued a statement saying it will formally demand that Bank of New York Mellon [BKNYK.UL] and Citibank Argentina make the payouts despite Griesa's order.

"The money belongs to the holders of restructured Argentine bonds," the statement said.

The economically ailing South American country defaulted on about $100 billion on sovereign bonds in 2002. Most holders of those bonds accepted less than 30 cents on the dollar in the 2005 and 2010 restructurings. A minority of holders opted to sue in the U.S. courts for full repayment.

Griesa stepped in on Monday to defend the mediator he appointed to help settle the dispute after Argentina accused the go-between of bias.

The country's gross domestic product is expected to shrink this year, according to the United Nation's body for Latin America, as fallout from the debt crisis keeps the region's No. 3 economy out of foreign debt markets.

(Reporting by Walter Bianchi, Hugh Bronstein and Daniel Bases; Editing by Ken Wills)