* MoneyGram had lost $1.6 billion on risky debt
* Most of cash settlement covered by insurers
* MoneyGram shares fall
By Jonathan Stempel
NEW YORK, Feb 25 Payments services company
MoneyGram International Inc MGI.N said it had agreed in
principle to an $80 million settlement to resolve a securities
fraud lawsuit stemming from $1.6 billion of losses it suffered
on subprime and other risky asset-backed securities.
MoneyGram said it reached agreements on Wednesday to
resolve a shareholder class-action lawsuit and a shareholder
derivative lawsuit pending in the U.S. District Court in
Minneapolis, where it is based.
These agreements require court approval once final
documentation is signed.
MoneyGram said its insurers would cover all but $20 million
of the $80 million cash payment due to resolve the class-action
case. It said the settlement of the derivative lawsuit called
for improved corporate governance and internal controls, some
of which were already in place.
A lawyer for the lead plaintiff in the class-action case,
the Oklahoma Teachers' Retirement System, did not immediately
return a call seeking comment.
MoneyGram Chief Executive Pamela Patsley said in a
statement that the company was pleased to settle.
Shareholders bring derivative lawsuits on behalf of
companies, rather than their own behalf, to enforce or defend
rights that the companies fail to address on their own.
MoneyGram was among the first publicly traded U.S.
companies to face serious financial trouble after the housing
and credit markets began to weaken significantly in 2007.
Its losses led to a March 2008 recapitalization in which
affiliates of private equity firm Thomas H. Lee Partners LP
[THL.UL] and Goldman Sachs Group Inc (GS.N) bought $760 million
of preferred stock that could be converted into a 79 percent
equity stake in MoneyGram.
In the class-action case, shareholders complained that
MoneyGram and its executives at the time hid the deterioration
in its asset-backed investments, believing that investors would
panic if they learned the truth.
MoneyGram shares traded above $37 as recently as 2006, only
to fall below $1.00 in 2008 and early 2009. In Thursday morning
trading, they were down 5 cents at $2.79.
Separately, MoneyGram said the three directors who were on
its board prior to the recapitalization and remain in their
seats had decided not to seek reelection.
The shareholder lawsuit is In re MoneyGram International
Inc Securities Litigation, U.S. District Court, District of
Minnesota, No. 08-00883.
(Reporting by Jonathan Stempel; Editing by Ted Kerr)