NEW YORK - Argentina on Friday offered two New York hedge funds to repay its debt to them with cash and new bonds on conditions similar to those used in a 2010 debt swap.

The South American nation is facing a court order to pay out $1.3 billion (one billion euros) to bondholders on debt it defaulted on during its 2001 financial crisis.

The offer was contained in a filing to the New York Court of Appeals.

"The Republic proposes, following the terms of the 2010 exchange offer, to compensate plaintiffs with their choice of par or discount," said the document filed by the law firm of Cleary, Gottlieb, Steen & Hamilton, as expected, shortly before midnight.

Argentine President Cristina Kirchner has already said she is willing to re-extend the restructuring terms of 2005 and 2010 to hedge funds NML Capital and Aurelius Capital Management, which she has branded "vultures."

That offer would repay the investors around 70 percent of their capital in nominal terms as the bonds mature in the next 28 to 33 years. Those terms were already accepted by holders of 92 percent of the bonds but have been rejected by the holdouts.

If Argentina's latest offer is rejected, the government would be forced to repay the hedge funds in full now, as New York judge Thomas Griesa ordered late last year in a landmark judgment.

But because of "pari passu" or "equal treatment" clauses in the restructured bond contracts, Buenos Aires could be forced to pay back all others at the same time, possibly forcing it to default on all its debt.

"The proposal fulfills the court's dual objectives to satisfy the pari passu clause: non-discrimination in payment priority and equal treatment among bondholders," the Argentine document said.

"This proposal is a voluntary option: plaintiffs can choose between being paid 'equally' on the same terms as the exchange bondholders, or obtaining, and seeking to execute on, judgments for the full amount of their claim," it went on to say.

According to the filing, plaintiffs will receive "significant compensation" while the country's capacity to pay will be preserved.

The proposal also calls for repaying small individual investors with cash for the interest that has accrued since 2003 and so-called Par and GDP bonds.

Meanwhile, institutional investors are to be offered mainly high-return discount bonds.

Argentina defaulted on some $100 billion in debt in 2001, and has since restructured its debt twice, covering around 75 percent of the nominal value of the bonds.

But hedge funds NML Capital and Aurelius Capital Management, which bought up some of the original defaulted debt at steep discounts, refused to go along with the restructuring and are suing to recover 100 percent of the bonds' value, a total of $1.3 billion. In an October ruling, the appeals court upheld a lower court ruling that Argentina would have to repay both sets of the bonds.

Analysts do not expect the Buenos Aires plan to be accepted, leaving Argentina little legal recourse but to comply and multiply its debt problems or appeal to the US Supreme Court.

"If you have a judgement for $1.3 billion, you are not going to be told that you have to accept, in lieu of your money, new bonds with new terms," said Richard Samp, chief counsel of Washington Legal Foundation.

The case has sent tremors throughout the world of sovereign bonds because of the precedent it could set for the rights and treatment of investors who refuse to go along with debt restructuring pacts after defaults.

If the hedge funds are allowed to collect everything they claim, it could make it impossible for defaulters to restructure their debts without 100 percent participation from investors.

In a letter published in the Financial Times Thursday, Aurelius Capital Chairman Mark Brodsky argued that was not likely to happen.

Even after the ruling against Argentina last year, he said, "Greece conducted a restructuring far larger than Argentina's."