UPDATE 1-MasterCard to prepay obligations under settlement

* MasterCard will prepay $335 million

* Payment will be made on September 30

* Shares fall 0.07 percent to $165.73 in morning trading

NEW YORK, July 2 (Reuters) - MasterCard Inc (MA.N), the world's second-largest credit card network, said it agreed to prepay its obligations under a legal settlement with U.S. merchants and will receive a 16 percent discount.

MasterCard will pay $335 million to settle obligations through 2012 totaling $400 million, the company said on Thursday.

The prepayment, which is subject to court approval, will be made on Sept. 30.

In a settlement in 2003 in an antitrust class-action suit, MasterCard International Inc, the principal subsidiary of MasterCard, agreed to pay merchants $125 million that year and $100 million annually each December from 2004 through 2012.

MasterCard stock was down 61 cents to $165.23 in morning trading on the New York Stock Exchange. (Reporting by Juan Lagorio, editing by John Wallace)