Citigroup Inc.'s $1.13 billion mortgage-securities settlement
with private investors may not be wrapped up for a few more
months.
The trustees involved in the settlement, which include units of
Deutsche Bank AG, HSBC Holdings PLC and U.S. Bancorp, have asked
for another extension as they decide whether to approve the
deal.
In a notice dated Friday, the trustees said they were still
waiting for the opinions of "expert advisors" on the proposed
settlement as it relates to each of the 68 mortgage-securities
trusts involved in the agreement. The trustees said they want to
review those evaluations, combined with any "valid directions" from
investors.
The April settlement between Citigroup and investors represented
by Houston law firm Gibbs & Bruns originally gave the trustees
a deadline of June 30, with the option to extend to Aug. 14. The
trustees said in the Friday notice that Citigroup has now granted
them a deadline of Oct. 31.
The settlement was meant to put to rest the complaints of 18
institutional investors who said Citigroup had misled them about
the quality of the mortgage securities they bought from the
bank.
The trustees have reason to be cautious. In June, an investor
group led by BlackRock Inc. and Pacific Investment Management Co.
sued a group of trustees--including Deutsche Bank, HSBC and U.S.
Bancorp--claiming they ignored "pervasive" signs of bad mortgages
in securities they'd bought. Deutsche Bank declined to comment,
while representatives for HSBC and U.S. Bancorp didn't have an
immediate comment.
The trustees serve as administrators for investors in a
structured deal such as a mortgage-backed security, but investors
have argued that the trustees also have a fiduciary duty to their
investors.
BlackRock and Pimco are both among the investors in the
Citigroup settlement. A Citigroup spokeswoman declined to
comment.
The process highlights the complications banks face as they wade
through crisis-era litigation, even after initial agreements are
reached.
J.P. Morgan Chase & Co. announced a $4.5 billion settlement
in November with private investors, but it wasn't until Friday that
the trustees representing those investors agreed to accept parts of
that settlement. Those trustees are still reviewing some of the
mortgage-securities trusts that are supposed to be included in that
settlement, accepting some and rejecting others, according to a
J.P. Morgan filing on Monday.
A settlement that Bank of America Corp. brokered with private
investors, over mortgage securities, took longer. The bank agreed
in 2011 to pay $8.5 billion to mortgage-securities investors, with
Bank of New York Mellon Corp. acting as trustee. But some
investors, led by American International Group Inc., pushed back,
saying that Bank of New York should have lobbied for a better deal.
It wasn't until last month that AIG agreed to drop its
protests.
The investors in the settlements with Citigroup, J.P. Morgan and
Bank of America all have been represented by Gibbs & Bruns.
Al Yoon contributed to this article
Write to Christina Rexrode at christina.rexrode@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires