Citigroup's $730M Deal With Bondholders OK'd
MANHATTAN (CN) - A federal judge has approved a $730 million settlement for bondholders who claimed that Citigroup concealed its exposure to $66 billion of subprime mortgage assets before the financial crisis.
Attorneys for Bernstein Litowitz Berger & Grossman say the settlement is the second-largest recovery in a securities class action brought on behalf of purchasers of debt securities.
The decision comes three weeks after U.S. District Judge Sidney Stein approved a $590 million settlement on behalf of Citigroup's shareholders represented by attorneys at Kirby McInerney.
"Certainly, the settlement does not represent the best possible recovery for plaintiffs; their damages experts estimate that to be approximately $3 billion," Stein wrote. "Nevertheless, a recovery of $730 million represents a substantial sum."
The class of bondholders had sued over 48 bond issuances that occurred between May 2006 and November 2008.
They claimed Citigroup downplayed its risk to about $166 billion of collaterized debt obligations, or CDOs, backed by subprime mortgages and overstating the credit quality of those assets.
Citigroup has denied wrongdoing in the agreement.
Attorneys are seeking a 20 percent of the settlement amount, or $146 million, but Stein has yet to rule on that issue. In the previous case, lawyers got $73.6 million in lawyers' fees from Stein, which was less than the $100.2 million they sought.