Argentina says to bring defaulted debt under national law

BUENOS AIRES, Aug 19 (Reuters) - President Cristina Fernandez said on Tuesday her government will move to service its defaulted debt in Argentina or allow bondholders to swap their bonds for new bonds governed by national law in order to get around a U.S. court order.

Argentina slid into default last month after a New York court blocked an interest payment owed to holders of debt that was restructured after the country's record 2002 default. The judge said Argentina could not pay that debt until it had also settled with a group of funds that had rejected the restructuring deal and were demanding full payment.

Fernandez's announcement killed hopes that Argentina might soon reach a deal with holdouts, enabling it to exit default.

In a televised speech, Fernandez said her government would send a bill to Congress to remove Bank of New York Mellon as the exchange bondholders' trustee and replace it with Argentina's Banco Nacion. Banco Nacion would open up an account at the country's central bank to enable Argentina to service its exchange debt there.

Under the proposal, holders of bonds resulting from the 2005 and 2010 debt restructurings could also choose to swap their bonds for notes with "identical terms and financial conditions, and with equal nominal value" under Argentine law.

(Reporting by Sarah Marsh and Walter Bianchi; Editing by Kieran Murray and Ken Wills)